Finance Leasing Manual - FLM12.17

Absence of secondary lease period

Some of the reasons for the absence of a secondary lease period include-

• the 'loan' is being repaid over the full useful life of asset, so that the primary period covers the full useful life - see FLM11.49;

• although the lessee wants financing terms which enable it to enjoy the rewards of economic ownership of asset, it does not intend to use the asset for its full useful life - see FLM12.19;

• although the lessee wants financing terms, it does not need them for the full useful life of the asset - see FLM12.22.

But there may be cases where the reason for the absence of a secondary period may not be readily apparent, even though the lease is a 'full payout' lease and the term of the lease is shorter than the useful life of the asset. See FLM12.27 onwards for more guidance on such cases.