What is a method for financing that keeps the asset ownership with the vendor until the lease is purchased?

A true lease is a financing method where the asset ownership remains with the vendor (lessor) until the lease agreement is fully executed, which may include an option to purchase at the end of the lease term. In this arrangement, the lessee (the party using the asset) pays for the right to use the asset without actually owning it during the lease period. This approach allows businesses or governments to utilize assets without the upfront costs associated with purchasing them outright.

In a true lease scenario, the vendor retains ownership, and therefore, the asset does not appear as an owned asset on the lessee's balance sheet, which can be beneficial for financial reporting and cash flow management. The lessee is often responsible for maintenance and other operating costs, which can also be advantageous.

Understanding the nature of a true lease is important, as it distinctly contrasts with a capital lease, where the lessee effectively assumes ownership of the asset after a set period or under specific conditions. Other options, like special district or assessment bonds, involve different financing mechanisms not focused on leasing arrangements.