A more thorough explanation:

A capital lease, also known as a lease-purchase agreement, is a type of rent-to-own purchase plan where the buyer takes possession of the goods with the first payment and takes ownership with the final payment. It is a lease of property, especially equipment, by which ownership of the property is transferred to the lessee at the end of the lease term.

For example, a company may enter into a capital lease agreement to acquire a new piece of machinery. The lessee will make regular payments to the lessor over a fixed period of time, and at the end of the lease term, the lessee will own the machinery outright.

Under a capital lease, the lessee is responsible for paying taxes and other expenses on the property. This type of lease is usually treated as an installment sale.

Other terms used to describe a capital lease include lease-to-purchase agreement, hire-purchase agreement, and capital lease. It is different from an operating lease, where the lessee does not take ownership of the property at the end of the lease term.