ANSWERS: 2
  • A lease purchase agreement is a when a lessee agrees to pay a lessor payments on a piece of property, such as an automobile or home. The lessee has the option to apply the payments made toward the purchase of the property.

    Lessor

    The lessor is the party who controls the terms of the lease purchase agreement. This includes the length and payment terms of the agreement, along with the total purchase price of the property being leased.

    Lessee

    The lessee is the party in a lease purchase agreement who is responsible for honoring the payment terms of the agreement. She has the option to apply payments made to the purchase of the property.

    Length Of The Agreement

    The length of a lease purchase agreement is determined by the lessor. It is determined by a number of factors, including the budget and financial history of the lessee, and the cost of the property being leased.

    Option

    In a lease purchase agreement, an option refers to the lessee's right to apply payments made to the purchase of property. The lessee is not required to purchase the product at the end of the agreement.

    Considerations

    Before entering into a lease purchase agreement, a lessee should make certain that he has the financial means to honor the terms of the agreement.

    Source:

    The Lease Purchase Agreement

    New York Times: Lease-Purchase Agreement--Real Estate Q&A Blog

    University Of California: Sample Lease Purchase Agreement

    More Information:

    Federal Trade Commission: Look Before You Lease

  • One other thing to consider in a lease purchase agreement: After making many payments and being well on your way to complete the purchase you are injured or an event takes place that drastically reduces your ability to continue to make payments. With a conventional purchase (not a lease) you can sell the property to pay it off and recover what you have invested and possibly make money in the property value went up. With a lease you would just walk away from it, all equity is lost, and it remains the property of the original owner.

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