Accounting Dictionary

Leaseback

Sometimes people sell an asset to someone and immediately lease it back on a long term lease.

The seller gets to use the asset plus he/she gets cash to pay bills or invest in something else while the buyer makes a profit on the lease payments. Casey needed $10,000. He sold his 4 by 4 to his cousin George for $10,000. Casey now has his $10,000. George leased the 4 by 4 to Casey for $500 a month for 24 months. George will make a $2000 profit over two years (500 x 24 =$12,000 less the original outlay of $10,000).

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