Advantages of Leasing

3. Leasing

If a business needs assets such as a new computer system or fleet of vehicles, it has the choice of buying them or leasing them.

In practice, leasing is a form of hire under which the business has the use of the fixed assets such as computers or vehicles for an agreed period. The business leasing the assets has to look after maintenance.

Leasing is particularly advantageous in situations of uncertainty or where the business is not willing to commit large capital sums to buy assets. It can also make sense where technology changes rapidly and a business needs to update its equipment regularly. Further, leasing can have tax advantages for both the business leasing the assets and the lessor.

Leasing is available to all types of business.

In some cases, there may be an option to buy the assets at the end of the lease. This arrangement is called lease/purchase

Advantages of Leasing

1.    There is no need of making immediate lump sum payment.

2.    Leasing company will sometimes provide maintenance service.

3.    As computers (for example) are highly sophisticated, it may go out of date soon and then it will be easy to replace. Purchased computers will have to be kept for longer to recover the investment.

4.    Leasing is a cheap method of finance, comparing to many other methods.