when it comes to cars and equipment the leasing company essentially buys the car from the dealer and rents it to you so the lessor has lent the money for the purchase upfront and you are paying back on that loan 
although the dealer and the leasing party can be the same person setting up the three party agreement allows the dealership to sell inventory to the leasing arm and the leasing arm to generate income on these pseudo loans before moving the vehicle back into the dealership as used inventory the lessee gets a car that they can use without the burden of ownership in the case of an automobile lease the monthly payment on the vehicle is based on the car s expected depreciation and residual value a predetermined amount that the car will be worth at the end of the lease term as well as the lease rate which is usually stated as a percentage through monthly payments the lessee compensates the automobile dealer for both the vehicle s depreciation and for tying up assets in vehicles instead of investing that money elsewhere in this case the lease rate is roughly equivalent to an interest rate the lease payments include the lease rate factor also called the money factor that captures the financing element of car leases in the case of commercial property the building has been constructed as an investment with the hopes of bringing in tenants there are only two entities in this transaction and any compensation for the initial investment in the building is baked into the lease rate as part of the overall business plan 