Definition

ETC. One type debt instrument which is similar in some ways to a mortgage or a lease. With an equipment trust certificate, the investor is given use of a particular asset, which he/she pays for over time according to the specifications of the agreement. When the debt is fully paid off, the investor receives the title for the asset. ETCs are commonly used as a method for financing the purchase of items such as aircraft; these certificates were originally designed for financing railroad cars. Some companies prefer using ETCs because of the tax benefits; since the asset is not officially owned by the company while they are still paying for it, it is not considered property of the company and taxes are not owed on it.

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