A Government / Municipal Lease - Purchase provides for termination for non-appropriation of funds by the government agency. The authority of an administrator to enter into debt or obligation of future funds is often severely limited. Therefore, a Government / Municipal Lease - Purchase contains a non-appropriation clause that specifies that the lease can be terminated in the event funds are not made available in subsequent fiscal years. Title to the equipment usually resides with the lessee so that the Government Agency's sales and property tax exemptions apply.

The lessee intends to purchase and take title to the equipment. The financing is a full payout contract with no significant or balloon payment at the completion of the lease.

The lease payments include the return of principal and interest, with the interest being exempt from Federal income taxation to the recipient. Typically, a tax-exempt interest transaction will be financed at interest rates lower than equivalent commercial financing.

States and their political subdivisions such as counties and cities, departments or agencies such as universities, school districts, fire, police, hospitals, sanitation or special districts. A governmental entity must possess one of the following 3 characteristics: (1) the power of eminent domain, (2) police powers, or (3) the power to levy taxes.