A finance lease (also known as lease hire or a capital lease) is a means of business asset financing where you (the lessee) essentially leases an asset from a finance company (the lessor) for a fixed period of time to cover the cost of the asset, a period reflecting the asset’s full useful life.
At the end of the agreed period of the finance lease, you can then either: extend the lease and carry on using the asset or sell it on behalf of the lessor – in some cases receiving a percentage of the asset sale value.
With a finance lease, the lessor is the owner of the asset, while you the lessee has exclusive use of the asset. You take on the risks and rewards of asset ownership (i.e. fluctuation in value and maintenance) but never actually own the asset. It’ll appear on your balance sheet, with outstanding rental payments appearing as a liability.