What characterizes a "full payout lease"?

A full payout lease is characterized by its comprehensive structure, which encompasses the total cost of the asset, including both the purchase price and any applicable interest and fees. This type of lease is designed to ensure that the lessor fully recoups their investment over the duration of the lease agreement.

In a full payout lease, the total payment made by the lessee will cover the depreciation of the asset as well as the financing costs associated with the lease. This means that by the end of the lease term, the lessor has been compensated for the complete value of the asset, making it a key feature of this lease type. Such leases are typically longer in duration and may often lead to the lessee acquiring the asset at the end of the term, or they may have the option to purchase it.

Other types of leases may not take into account the full cost, focusing on specific components like just the depreciation or being structured differently in terms of payment schedules and obligations. A full payout lease, however, consolidates all these costs into one comprehensive payment plan, ensuring that the lessor is safeguarded against loss.