Definition
Capital Lease – A lease structured so that substantially all the risks and rewards of owning the asset (heavy equipment, machinery, vehicles) transfer to the lessee, functioning economically like a loan secured by the asset rather than a rental. Contrasts with an operating lease, where the lessor keeps those risks and rewards. For a multifinance company, finance lease income is interest-like income earned over the lease term, not rental income. Found In: Income Statement, Balance Sheet (Notes to Financial Statements)