The advantages of leasing are crucial in the context of leasing. When cost of leasing is compared with the cost of buying, the prime advantage of leasing can be understood. If a firm is experiencing losses for a period of time, it cannot enjoy the advantages of depreciation tax on the purchase of assets.
But if the firm accepts lease of assets from a leasing company, then it can take the full advantage of tax benefit on the assets that are owned by the lessor.
Some of the prime advantages of leasing are:
Convenience and Flexibility
The concept of leasing can be very useful if a particular asset is required for a short period of time. Purchasing the asset and then reselling it after use can be inconvenient, time-consuming and costly for the user. While leasing the same asset can be advantageous for the users.
The long-term financial leases can also be beneficial for the users as borrowing capital from banks involves long and tedious procedures. Considering the assumption that the leasing industry is developed well, the financial leases can be negotiated easily and fast.
The lessees can also enjoy the advantage of tailored lease payments depending on the nature of the cash flow of the lessee.
Maintenance and Specialized Services
The lessees can enjoy the advantage of full service leases in the maintenance and specialized services. For instance, the manufacturers of the computers that lease out computers are equipped in a better way in order to offer specialized services and maintenance. The cost of the business is also less for lessee, as the assets are not owned by him. In this case, the leasing company is able to offer specialized services and maintenance in lesser cost because of their specialization.
Shifting of Risk of Obsolescence
The various business sectors are exposed to the risk of obsolescence due to continuous developments and innovations that are being made. The lessees can shift a considerable amount of risk of obsolescence to the lessor by taking the short tem cancellable leases.
Last Updated on : 27th June 2013