Leasing becomes a preferred solution to solve capital requirements rather than purchasing the asset. When evaluating this investment, it is essential that the owner of the capital understands whether leasing would produce a better return on capital. But what does it consist of? What does the leasing process involve?
An age-old concept
Lease financing is based on the observation made by Donald B. Grant in 1911: “Why own a cow when milk is so cheap? Indeed, this clear dissociation between “ownership” and “use” of the heritage has led to a dramatic increase in rental in recent decades. Leases for the rental of apartments, offices, mines, vehicles, etc. are frequent examples of such leases. A lease can be defined as an agreement between the lessor (owner of the asset) and the lessee (user of the asset). The lessor purchases an asset for the lessee and allows the lessee to use it in exchange for periodic payments called rents or
minimum lease payments. Leasing is beneficial to both parties because it allows them to take advantage of tax benefits or to do tax planning.
A formula with advantages
There are several other advantages to leasing, including:
– Reduced repair costs, as the warranty covers most of them.
– Sales tax reduction.
– Lower monthly payments than at the time of purchase.
– Very low-down payment.
– Fewer obligations.
Once the term of your lease is over, you can choose a new lease and enjoy all the benefits and features of another new property. It also means that you can use better materials for less money every month.
A thoughtful commitment
Before signing a contract, think about how long the equipment will last. If it is technological equipment, such as a computer, you may want to rent it for a shorter period. You need to know who is responsible for repairs and damage during the rental period. You should talk to your insurer and the landlord to make sure you have coverage on the items. It is your responsibility to shop, negotiate and find a rental company with which you are comfortable working.
In short, leasing is a very popular secular rental method nowadays, offering many benefits whose commitment must be taken seriously.