What Is Financial Leasing?

Today, businesses prefer to carry out their large-scale investments not through direct purchase, but through the financial leasing method. This method provides significant advantages in terms of both capital preservation and long-term usability. 
The financial leasing agreement, also known as leasing, is an effective financing instrument frequently used in the acquisition of high-cost assets such as machinery, vehicles, equipment, or real estate. 

What Is Financial Leasing (Leasing)? 

Financial leasing is a special type of agreement regulated under Law No. 6361 on Financial Leasing, Factoring, and Financing Companies. Under this agreement, the lessor (leasing company) purchases an asset suitable for the lessee’s needs and grants the right of use to the lessee. The lessee, in return, uses the asset for a specified period by paying periodic lease payments. 

At the end of the contract term, if stipulated in the agreement, the lessee obtains the right to purchase the asset for a specified price. Thus, financial leasing carries the characteristics of both a lease agreement and a financing method. 

Parties to the Financial Leasing Agreement 

A financial leasing agreement generally involves three parties. These are: the lessor (leasing company), the lessee (user of the asset), and the seller. 

The lessor is the party responsible for the financing aspect of the agreement and is usually a financial leasing company or a bank. The lessee selects the asset, the lessor purchases it, and grants the lessee the right of use. The lessee uses the asset throughout the contract term and pays the lease installments regularly. The seller sells the asset to the lessor but is not a direct party to the agreement. This structure establishes a legal balance among the three parties. 

Legal Nature of the Financial Leasing Agreement 

The financial leasing agreement differs from a traditional lease agreement. Ownership of the leased asset remains with the lessor; however, economic ownership—meaning the benefit derived from the asset—largely belongs to the lessee. For this reason, financial leasing is considered a mixed-type agreement. 

The agreement contains elements of both lease and sale. While the lessee holds the right of use during the lease term, the transfer of ownership usually occurs at the end of the contract or upon payment of the specified amount. In this respect, financial leasing is governed by special legislation rather than the Turkish Code of Obligations. 

Essential Elements of the Financial Leasing Agreement 

For an agreement to qualify as financial leasing, certain elements must be present. 

First, ownership must remain with the lessor. Throughout the contract term, the asset belongs to the lessor, while the lessee holds only the right of use. Second, the agreement must be for a definite period. Financial leasing is generally long-term and differs from short-term lease relationships. Third, the lessee must pay lease installments periodically, usually on a monthly or quarterly basis. Fourth, the asset must be selected by the lessee, while the lessor provides the financing. Finally, the agreement must be executed in writing and registered. 

Under the law, these agreements do not become valid unless they are registered with the Association of Financial Leasing Companies. 

Rights and Obligations of the Parties 

The lessor is obliged to procure the asset selected by the lessee, deliver it in a usable condition, and provide financing in accordance with the contract terms. Since ownership of the asset remains with the lessor, the lessee is expected to use the asset in good faith and with due care. 

The lessee’s primary obligation is to pay the lease installments on time. Additionally, the lessee is responsible for maintaining the asset, paying insurance premiums, and refraining from using the asset for purposes other than those specified in the contract. If a purchase option is stipulated, the lessee may acquire ownership by paying the agreed price at the end of the term. 

This balance secures the lessor’s investment both financially and legally, while granting the lessee a long-term right of use. 

Advantages of the Financial Leasing Agreement 

Financial leasing is a powerful financing instrument for both businesses and individual entrepreneurs. 

• Companies can use high-cost assets without owning them. 

• Lease payments may be deducted from the tax base, providing a tax advantage. 

• Since ownership remains with the lessor, the debt burden on the balance sheet does not increase, strengthening financial statements. 

• Contract terms can be flexibly arranged according to the needs of the parties. 

In these respects, leasing is more flexible, secure, and cost-effective compared to traditional credit methods. 

Conclusion 

The financial leasing agreement is a modern financing method that enables businesses to use equipment and real estate without making major investments. However, for these advantages to be sustainable, both the economic and legal aspects of the agreement must be carefully considered. 

A properly structured financial leasing agreement safeguards the rights of the parties, whereas an incorrectly drafted agreement may lead to serious financial consequences. Therefore, working with a lawyer specialized in financial leasing and contract law at every stage of the process is of great importance for both legal security and commercial sustainability.