A finance lease is a type of lease agreement where the lessee (the user) pays for the use of an asset over a specified period. Unlike operating leases, finance leases typically cover most of the asset's useful life, and the lessee often has the option to purchase the asset at the end of the lease term. This arrangement allows businesses to use expensive equipment without a large upfront payment. In a finance lease, the lessee is responsible for maintenance and insurance, similar to ownership. The asset is recorded on the lessee's balance sheet, which can impact financial ratios and borrowing capacity. This makes finance leases a popular choice for companies looking to manage cash flow while acquiring necessary assets, such as vehicles or machinery.