Leasing is a peculiar method of investment activity. In fact, leasing is a long-term lease of property, both movable and immovable. This is something like a commodity loan that is provided to the lessee. The lease agreement often provides for the right to later repurchase the property.
The main features of leasing
In our country, the use of leasing is of great importance in terms of renewing production assets and increasing the competitiveness of production. Thus, leasing as a form of investment solves many important economic problems.
Leasing entities, i.e. those who are involved in the process are the lessor - a legal entity that transfers the property to lease, the lessee - a legal entity that receives the property for use, and the seller of the leased property - a production that manufactures equipment.
A big plus in relation to other forms of investment is the fact that the loan does not provide money, the expenditure of which is not always easy to control, but equipment that will definitely benefit production. Leasing can be of two types. The first type is operational leasing. In this case, the costs of the lessor are not covered by the payments of the lessee. This is often determined by the lease term. The second type is financial leasing. In this case, the costs of the lessor are reimbursed in full through rental payments, and even more - they bring profit to the lessor.
Why leasing is attractive as a form of investment
Thanks to the use of leasing, enterprises can receive the equipment they need for production without significant capital expenditures. As for the benefit of the lessor, it consists of his new investments and lease payments. The lease payment consists of several components. Firstly, it is the amount that fully or almost completely reimburses the value of the leased property. Secondly, the lease payment includes the amount for credit resources that were used by the lessor to acquire the property. Thirdly, this is a commission to the lessor. Fourth, the lessor can insure the leased property, and then insurance payments are added to the amount of lease payments.
In addition, other payments may be stipulated in the lease agreement.
The leasing agreement gives the lessor a number of advantages. This is the expansion of the range of products, and the possibility of selling technical equipment that cannot be sold on other terms, and the expansion of business ties. The lessee also does not remain at a loss: he receives the necessary equipment without significant costs, the opportunity to reduce taxes (due to lease payments), as well as simplified lending compared to a bank. The equipment supplier saves time and money on advertising, consumer search and demand research. Its immediate task is only the production of equipment, everything else is the task of the lessor.
