A type of lease in which a financier (a finance company, a bank) is and remains the legal owner of the leased asset during the entire period of lease, while the lessee has operating control over that asset and enjoys the economic benefits/ risks incidental to the ownership of the asset. This lease is based on providing finance by acquiring an asset for, and placing it at the disposal of, a lessee, for most of the useful life of that asset. There are a set of criteria that must be met in order to classify the lease a sales lease (also, finance lease), including (1) coverage of a significant portion of the useful economic life of the asset by the lease term (generally, 75%), (2) existence of a bargain purchase option (whereby the lessee can purchase the asset at a price lower than its fair value at a future date, and (3) the net present value of minimum lease payments is 90% of the fair value of the leased asset, at least.

In a sales lease, the lessor is assumed to be selling a product (right of use, usufruct) to the lessee for each and every time unit over the lifespan of the contract. From the lessor’s point of view, the fair market value (or if lower, the present value of lease payments over the lease term) of the leased asset is not equal to its cost, and therefore a selling profit or loss would result. At the commencement date, a lessor recognizes the lease as a sales lease: recognition takes place at its net investment in lease, that is, the present value of lease payments calculated at the implicit interest rate, and the unguaranteed residual value. If the fair value of the leased assets exceeds the carrying amount (net of any residual value), the difference would be recognized as selling profit or loss.

A sales lease is also called a sales-type lease or a capital lease.