Advantages and disadvantages of Leasing or Lease finance over purchase of asset. One of the most important form of long term finance nowadays is Lease financing. In lease financing a company can rent a asset or acquire right to use an asset without buying it from the actual owner. It is a written agreement or deed between two entities or firms, one who owns the assets and the other one which wants to use the asset for rent. There are lots of advantages and disadvantages of lease finance, some of the important points are discussed here. It has become progressively more usual nowadays to lease purchase equipment, assets and vehicles. There are some mutual benefits for both lessee and lessor. On Lessee point of you leasing will be beneficial in many forms like avoiding bad investments, quickest and easiest method of financing, avoiding huge investments at one time etc. Lease finance not only limited to industrial equipment and assets. We can lease a car or two wheeler and any other domestic equipment. There are lots of financing companies and agencies which provides such options for the needy. If you or your organization is seriously thinking of leasing an asset, I suggest you to read Negotiate the Best Lease for Your Business written by finance gurus Janet Portman Attorney and Fred S. Steingold Attorney. This great book provides complete insight on determining the real cost of renting and negotiation techniques to get the most out of your agreement. The owner of asset or equipment, who wants to rent his asset is termed as 'Lessor'. The user of the assets who pays for it on regular intervals is termed as 'Lessee'. Till the tenure stated in the agreement between them, the Lessee can economically use the asset but the ownership of the asset remains with Lessor. As per the lease contract or agreement a predetermined fixed payment is done periodical by the lessee for using the asset, which is called as 'Lease rent'. After the lease period the possession of the asset reverts back to the Lessor. The Lessee should maintain the asset in good working condition under the contract period, he should not sell, mortgage, alter or modify the asset under the contract period. Car leasing has been drastically increasing in recent years, in which owner of the car leases it to another person under the contract.
There are two types of lease financing viz. Operating lease contract and Financial lease contract. Under Operating lease contract Lessor selects and buys the equipments or automobiles and leases it to the lessee, Lessor bears the insurance, maintenance and repair cost of the equipments or automobiles. Whereas