Fixed assets are normal in business operations. However, financing those assets is the critical issue. If you buy the asset outright, you tie up capital that can be used to expand operations or keep overall costs low in operating the company. You can buy the asset paying a down payment and borrowing funds from a lending institution and make payments over time. This is still a form of purchasing the asset. However, there is another option, leasing.
A financing lease exists when the lessee has the option to purchase the asset at termination of the lease. There are various options to purchase the asset, one is based on fair market value, another is an agreed purchase price at the lease onset, and the third option is a simple purchase price option of $1 or $10. Another term for this type of lease is ‘Capital Lease’.