Leasing is unique in three fundamental ways:
1. The lessor owns the equipment and is not simply financing it. In most cases, a lessor buys a piece of equipment only when it has a customer who wants to use it. In the case of airplanes and rail cars, however, there are leasing companies that order planes and rail cars without specific customer orders in the hope they will be able to lease the equipment when it is delivered.
1. The lessor owns the equipment and is not simply financing it. In most cases, a lessor buys a piece of equipment only when it has a customer who wants to use it. In the case of airplanes and rail cars, however, there are leasing companies that order planes and rail cars without specific customer orders in the hope they will be able to lease the equipment when it is delivered.
2. Leases are long. Though a computer lease probably lasts no more than three years, the lease on a rail car may last up to 25 years, and the lease on a power plant for 30 years. This means that at the start of the lease it is not easy to take into account everything that can happen to the equipment or to the lessee for the next 3 to 30 years.
3. There is no organized market for buying and selling leases. Leases are not traded like bonds or stocks because there are not enough common characteristics among them. Lease prices do not show up on Bloomberg or Reuters. There is a reasonably active private market for syndicating leases when they are originated.
Sales of seasoned leases (2 to 10 years old), however, are not common, so if a lessor is unhappy with the risk or return on a lease it has in portfolio, it may take a while to fix the problem. This lack of a ready market means that the lessor must be careful when deciding what leases it wants in portfolio and have the tools for tracking what is happening with the lessee, the equipment, and tax rates and regulations.