Merits of leasing

1. Leasing saves you the trouble of tying up large amounts of capital to buy the required asset.

 2. Lease payments are distributed in the most convenient way for the lessee, in sync with the period when the company starts profiting from the leased asset that is generating a return on investment.

 3. Leasing offers savings through tax preferences (profit tax, VAT deduction, property tax).

 4. Leasing offers the only possibility to apply accelerated amortization with a coefficient of up to 3. As a result, the balance-sheet value of property decreases at 3 times the normal rate, resulting in lower property tax.

 5. The repayment schedule (schedule of lease payments) is highly flexible. The lessee makes no payments until the leased asset is launched into operation.

 6. The leased asset may be reflected on the balance sheet of either the lessee or the lessor. In the latter case, the lessee has a chance to improve the structure of the balance sheet by reflecting the leased asset in off—balance sheet accounts (this is impossible with credit or direct purchase).

 7. Also, if the leased asset is reflected on the balance sheet of the leasing company, the lessee has no need to reappraise the fixed assets (in terms of the leased asset).

 8. At the expiry of the lease contract, the lessee has a chance to receive title to the leased asset at zero cost.

 9. As a rule, the lease contract is made for 3-5 years, which roughly corresponds to the payback period of the leased asset. If the leased asset is equipment with a long payback period, the lease contract may be prolonged to 5-6 years. Far from all lending institutions are prepared to offer such terms.

 10. Securing funding via leasing is much simpler, and collateral is required much less frequently, because the leasing company will own the asset until the expiry of the lease contract.

 11. Thanks to its simplicity, affordability and effectiveness, leasing enables lessees to keep their production assets up to speed with the modern market requirements, giving them considerable competitive edge.