Finance Leasing Manual - FLM11.67

Pre-use rentals

In some 'big ticket' arrangements amounts are paid by the lessee

• prior to the primary period (the 'pre-primary' period) or

• in the primary period but while the asset is still in the course of construction or manufacture.

These payments reflect the fact that the lessor will already have financed expenditure on the asset. Payments in the pre-primary period will usually consist of only a finance charge ('interest only') but payments made in the primary period may involve a further element being the balance of the full rent due under the lease (that is, the lessee will also be repaying some of the 'loan' as well).