Where a business rents a fixed asset rather than purchasing it outright and where the ownership of the assets remains with the finance company. Potential benefits of leasing over purchasing outright include: The cost is spread over time; Creates fewer cash flow problems; Maintenance is included in the package; Allows for updating; Limited commitment – equipment can be returned at the end of the contractual period. Possible drawbacks include: Higher costs over the long period of time; The equipment is never owned; The equipment does not appear on the balance sheet; The equipment cannot be used as collateral to back further loans.