What is leasing
Today in the financial-economic activity of enterprises of different ownership forms, has become very popular leasing. But for many, this word remains unclear. So what is leasing? Let us examine in detail this concept and all that it involves.
What is leasing
Let’s try to explain what leasing simple words. This concept is called the variety of services of financial nature. This service implies that one person transfers to another a property in use, there is the possibility of redemption. At first glance, is an ordinary rental. But actually, from rent, this operation differs in that the transaction involves three cut sides. Each of them is endowed with the rights and obligations in accordance with the contract.
Participants of leasing operations
Subjects of leasing operations is called:
- The lessor. Is the person who receives the rights to certain property granted to them to another person (the lessee) under certain requirements.
- The lessee. This is a person who takes a particular object of use is limited in time. The cost of services agreed in the contract. Generally, lessees are companies engaged in commercial activities.
- The seller. This is a person who, in accordance with the contract undertakes to transfer certain property pursuant to an agreement of purchase and sale the party specified in the document. As a rule, as a seller are dealers, companies or realtors.
To leasing companies include firms, companies and organizations that carry out leasing operations. Their actions often depends on the market situation. In the state of such companies have professionals whose duties include ensuring the maintenance of a specific object in a satisfactory condition. In addition to leasing operations, these companies are doing other types of services:
The demand for leasing
Recently, in connection with the financial crisis that led to instability in the economy, many entrepreneurs were in a situation where they for different reasons can’t apply for a Bank loan. In this regard, there is an outflow of capital from industries that lost investment attractiveness.
In this case, the lease in this case is the only possibility to continue the work of the enterprise and to develop their business. Leasing allows you to update a production and technical base of the enterprise, increasing fixed assets.
The leased objects
Such items considered to be:
- equipment for industrial purposes;
- vehicle, air;
- material funds.
The subject of leasing may be any non-consumable thing. Along with this it is impossible to draw up the lease on:
- property that has a military purpose;
- property with restrictions or that have been withdrawn from circulation;
- products in which no individual data (the number is the equipment, vehicle identification number and the like);
- land or natural objects.
Some limitations can be created by companies that are leasing. While they adhere to certain parameters of a General nature, which may affect constraints:
- items which do not have liquidity;
- the age of the subject (e.g., for car it should not exceed 3-7 years);
- brand or manufacturer (for example, the object of leasing can not be the cars of Chinese production, which was in use);
- each company individually defines the lower threshold value of the operation, therefore, in different companies on the same subject can be the difference in hundreds of times;
- financial condition and location of the client.
Advantages of leasing
In comparison with other types of similar financial services, leasing has its advantages:
- The opportunity to buy assets that are expensive without investing large amounts of money.
- Reducing the risks associated with the ownership of the assets.
- Reduction of property tax due to the rapid depreciation of the subject of the transaction.
- The reduction of the tax base.
- Accessibility for entrepreneurs.
- Quality assurance and different types of support.
- Flexible financial strategy provides opportunities to discuss suitable for all parties, the scheme of payments.
- A guarantee against irresponsible vendors and other intruders.
- The ability to choose the best supplier.
Disadvantages of leasing
Like any other services, leasing has a number of disadvantages:
- The complexity of the legal registration of the transaction.
- As a result, total cost of received item may be higher than if the item was bought on credit.
- The potential financial risks.
- The presence of a mandatory prepayment.
- The requirements of guarantees or security Deposit of the lessee.