What is the role of a lessor in a leasing agreement?

In a leasing agreement, the lessor plays the role of the party that owns the property or asset and leases it to another party known as the lessee. This involves granting the lessee the right to use the property for a specified period in exchange for lease payments. The lessor retains ownership throughout the lease term and is responsible for maintaining the underlying asset in many leasing agreements, while the lessee benefits from using the asset without the obligation of buying it outright.

This arrangement is commonly seen in vehicle leasing, where a lessor could be a dealership, a bank, or a leasing company that purchases the vehicle and allows the lessee to use it for an agreed duration. The payments made by the lessee are typically meant to cover the depreciation of the vehicle and provide profit for the lessor.

Understanding the role of the lessor clarifies the dynamics of leasing agreements and distinguishes it from other roles that could be present, such as the payment responsibilities of the lessee, management duties which might be handled by property management firms, or insurance responsibilities that typically fall more on the lessee.