The two basic types of leasing are:

A) Operating Lease - The customer does not own the equipment. The leasing company (lessor) owns the equipment and depreciates it for tax purposes. The customer (lessee or user) of the equipment expenses the payments and does not take ownership. At the end of the lease term, the equipment is returned to the lessor. The lessee may be responsible for maintenance and the condition of the equipment to varying degrees depending upon the type of operating lease. In some cases, the lessee can purchase the equipment at the end of the lease term, provided they do not acquire it at a "bargain" price, which could cause a reclassification of the lease for tax purposes. In most cases, companies choosing the operating lease do not want to own the equipment and do not seek to buy it at the end of the lease term. These customers have chosen an Operating Lease in order to take advantage of the specific financial features that this type of lease provides.

B) Capital Lease - The customer does own the equipment or takes ownership at the end of the lease term when all monthly installment payments have been made. These are often called dollar-option leases or sometimes full payout leases because the document reads that the customer makes lease payments and then buys the equipment for $1.00 at the end of the lease term. These really are not leases in the true sense. They are retail installment contracts. The term "lease" is used when it really should not be but the majority of people use it even for these retail installment contracts so it is just easier to do so. There is a history going back about 35 years that explains how this terminology came into use, but no need to repeat that part here. The customer, user, or owner, owns the equipment and depreciates it as an asset on his/her books and makes the monthly payment to pay off the loan.