Introduction
Leasing is a popular method of obtaining equipment, vehicles, or property without the need for a large upfront payment. It involves renting an asset from a lessor for a specified period, usually with fixed monthly payments.
Types of Leasing
1. Operating Lease – Short-term lease where the lessor retains ownership of the asset.
2. Finance Lease – Long-term lease where lessee takes control of the asset and assumes most of the risks and rewards of ownership.
Benefits of Leasing
- Conserves capital
- Tax advantages
- Fixed monthly payments
- Upgrades to newer assets
Case Study: XYZ Company
XYZ Company decided to lease a fleet of vehicles instead of purchasing them outright. By doing so, they were able to reduce their upfront costs and also benefited from tax savings. The fixed monthly payments made budgeting easier for them, and they were able to upgrade to newer models when the lease term ended.
Statistics
According to the Equipment Leasing and Finance Association, leasing accounts for over $1 trillion in annual revenue in the U.S. alone. Small businesses make up a significant portion of this market, with over 70% using leasing as a financing option.
