Roman Danaev

25 May 2023

Meaning and Definition

In car finance, a lessor refers to the entity or company that owns the vehicle and leases it to the lessee (individual or business) under a lease agreement. The lessor is responsible for providing the vehicle for use during the lease term, maintaining ownership of the vehicle, and setting the terms and conditions of the lease agreement. They may be a leasing company, a dealership, or a financial institution specializing in vehicle leasing.

Why it is important to know

Understanding the concept of a lessor is important when considering leasing as a car finance option. The lessor is the legal owner of the vehicle and holds responsibility for maintaining the vehicle's ownership throughout the lease term. They determine the lease terms, including the lease duration, monthly payments, mileage restrictions, and end-of-lease obligations. It is important for lessees to understand the lessor's role and obligations to ensure a smooth and transparent leasing experience.

Example in car finance

Suppose an individual decides to lease a car. They enter into a lease agreement with a lessor, who may be a leasing company. The lessor owns the vehicle and allows the lessee to use it for an agreed-upon period and under specific terms. The lessor sets the monthly lease payments, lease duration, and any additional provisions such as mileage limits and maintenance requirements. Throughout the lease term, the lessee makes payments to the lessor and complies with the terms of the lease agreement. At the end of the lease, the lessee returns the vehicle to the lessor, subject to any excess mileage or damages beyond fair wear and tear.

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