Listen to a Business English Dialogue About Leveraged lease lease
Ariel: Hey Elizabeth, have you ever heard of a leveraged lease?
Elizabeth: Hi Ariel! Yes, it’s a type of lease agreement where the lessor borrows a significant portion of the funds needed to purchase the asset being leased.
Ariel: That’s right, Elizabeth. The lessor typically uses the leased asset as collateral for the loan, allowing them to finance a large portion of the asset’s cost with borrowed funds.
Elizabeth: Exactly, Ariel. This arrangement often provides tax benefits for the lessor and allows them to retain ownership of the asset at the end of the lease term.
Ariel: Right, Elizabeth. However, leveraged leases can also involve significant risks, especially if the leased asset’s value depreciates or if the lessee defaults on their lease payments.
Elizabeth: Absolutely, Ariel. It’s important for both parties to carefully assess the terms of the leveraged lease agreement and understand their respective obligations and risks.
Ariel: Agreed, Elizabeth. Clear communication and thorough due diligence are essential to ensure a successful and mutually beneficial leveraged lease arrangement.
Elizabeth: That’s correct, Ariel. By understanding the terms and potential risks involved, both the lessor and lessee can make informed decisions and mitigate any potential challenges that may arise during the lease term.
Ariel: Exactly, Elizabeth. Leveraged leases can be complex financial arrangements, so it’s crucial for all parties involved to seek professional advice and guidance when entering into such agreements.
Elizabeth: Absolutely, Ariel. With careful planning and proper risk management, leveraged leases can be a valuable tool for financing the acquisition of capital assets while providing tax advantages for the lessor.