The purpose of a capital lease is to allow the lessee to better predict its future expenses associated with the lease. For lessors, the capitalized lease results in higher periodic payments. This is because the interest portion of the payment gets applied to reduce the principal balance of the loan. As a result, lessors receive a higher return on their investment. In addition, the capitalized lease method results in a higher ending balance for the lease liability. This can be beneficial when the lessor goes to sell the lease or refinance the property.