Leasing is a type of financing that businesses use to obtain assets such as company cars, machines, computers, or photocopiers. Instead of purchasing the asset outright, the business enters into a contract with a leasing company, which finances the asset and leases it to the business for use or ownership. The business pays a monthly amount, known as a lease installment, to the leasing company for the use of the asset. At the end of the lease period, the business may become the owner of the asset directly or determine this at the end of the lease period.
Leasing is an important form of financing for the business community, especially for small and medium-sized enterprises (SMEs). SMEs conclude more than two-thirds of lease contracts, making the leasing industry a major source of finance for them.
There are different types of leasing, including operational leasing and financial leasing. Operational leasing is a type of lease where the leasing company is responsible for providing a quick solution if something breaks or if there are problems due to wear and tear. Financial leasing, on the other hand, is a type of lease where the business becomes the owner of the asset at the end of the lease period.
Leasing is not limited to physical assets such as machinery, vehicles, or computers. It can also be used for real estate and personal property. The leasing business model involves a company purchasing a product and then leasing it to customers for a periodic fee. The seller passes the property of the item to the lessor, which is a financier.
Advantages of leasing include lower monthly payments, service agreements or service add-ons, and the ability to access new technology more easily and quickly to stay competitive. Leasing also allows businesses to avoid the risk and cost of purchasing an item outright.
In summary, leasing is a type of financing that businesses use to obtain assets without purchasing them outright. The leasing company finances the asset, and the business pays a monthly fee for its use. Leasing is an important form of financing for SMEs, and it can be used for physical assets, real estate, and personal property. Advantages of leasing include lower monthly payments, service agreements, and the ability to access new technology more easily.
