What defines the primary function of a lease?

The primary function of a lease is to provide the lessee with control over the use of an asset. This arrangement allows the lessee to utilize an asset without needing to purchase it outright. In a lease agreement, the lessee obtains the right to use the asset for a specified period in exchange for periodic payments, while the lessor retains ownership of the asset.

This arrangement is particularly useful because it allows businesses to access necessary equipment or property without a significant upfront investment. The control over the asset facilitates operational flexibility, enabling firms to adapt their resources according to changing needs without the financial burden of ownership. This characteristic distinguishes leasing from purchasing or borrowing, as it centers on the utilization aspect rather than outright ownership or financing agreements.

In contrast, a contract conveying rights to own an asset would imply a purchase rather than a lease. Short-term borrowing agreements do not inherently include the use of an asset but rather focus on financial transactions, while methods to sell personal property diverge from the nature of leasing, which is about temporary use rather than transfer of ownership.