From year to year, leasing is becoming an increasingly popular form of financing. It is chosen by both large enterprises and self-employed persons. Thanks to leasing, we can purchase the necessary equipment without overburdening the company’s budget. Especially that this service has many advantages.
Leasing is one of the most favorable ways of financing
Business purchases, because it requires only a small commitment of own capital. In this way, we can modernize the company or purchase the necessary equipment at a relatively low cost.
In particular, the subject of the lease may be:
- Office equipment: computers, photocopiers, furniture;
- Means of road transport: passenger cars, vans, trucks, special;
- Other machines: construction equipment, cranes, technological lines;
- Ships, planes;
- Real estate: office buildings, industrial buildings.
Definition of leasing
Everyone knows the definition of leasing, and the term ‘leasing’ comes from the English word ‘lease’, which means ‘renting’. The very explanation allows you to understand the essence of leasing. Leasing is a popular way of financing purchases by entrepreneurs.
It consists in the fact that one of the parties to the lease agreement gives the other the right to use the item for a specified period of time, as part of the fee, which is divided into installments. More clearly, it is the entrepreneur who uses a leased property on a daily basis, for which he pays a monthly fee, but is not its formal owner.
Leasing is actually a form of borrowing a given item to an enterprise in exchange for a monthly fee. The leasing period usually lasts a few years, but of course, it depends on the value of the leased item. After the end of this period, we have the opportunity to buy the property, but we are not obliged to do so.
When concluding a leasing contract, it is worth remembering to pay attention to the following parameters and their scope:
- The amount of the leasing installment and the value of the goods;
- The date by which the lease installments should be repaid;
- Terms of buying leased goods;
- Insurance information;
- The listed collateral for the leasing contract;
- The amount of penalty fees, e.g. for late payment of installments;
- Procedures in the event of termination of the leasing contract by either party.
Types of leasing
All entrepreneurs who use leasing usually have two types of leasing. This is operational leasing and financial leasing. The first applies to 80-90% of concluded contracts. The second is used sporadically, but it is worth explaining how they differ.
They differ depending on what is the subject of the lease, as well as how the contract is structured, who can be its party and what both parties have rights and obligations towards the subject of the lease.
- Financial leasing – consists of putting things into use in exchange for leasing installments. It is mainly characterized by including an option clause for the sale of the subject of the lease after the end of the contract period. This means that the person using this leasing has the right to buy things;
- Operational leasing – the subject of the lease is the property of the lessor, who bears the costs of maintaining the subject of the lease, its repairs, and insurance and is obliged to pay taxes. A person using the leasing service uses the item and pays the rent;
- Leaseback – leaseback occurs in the form of both operational and financial leasing. It mainly consists in the fact that the lessee sells its own fixed asset to the lessor. Later, he signs a contract with the financing entity and takes over the sold item in a lease.
- Direct leasing – the first one is characterized by the fact that the lease agreement and service is concluded between two parties without intermediary entities;
- Indirect leasing – the latter is characterized by the fact that the lease agreement and service are concluded through an intermediary, e.g. a company specializing in such transactions. It allows you to complete most of the formalities on behalf of the client but also charges a commission on services.
- Car leasing – this means that the subject of the leasing contract is a car. Car leasing is a form of vehicle financing that can be used by entrepreneurs or private individuals;
- Consumer leasing – this option can be used by a person who does not run a business. It’s a good solution for individuals who want to drive a new car and cannot afford to buy it for cash.