Question

In your firm, what benefits does leasing offer, compared to the purchase of an asset? Provide examples.

Answer 1

Following are the benefits of using Lease option in place of purchasing the asset:

1) Less initial investment - There is only minimal or no Initial investment requirement in leasing option. There'll be monthly payments.

2) Focus on other core activities - By leasing ay asset / equipment, the enterprise can focus on other core activities of business. In many agreements, maintenance etc. is also covered in lease option.

3) Tax benefits - Lease amounts are tax deductible. Therefore, firm can get tax benefits

4) Flexible terms - Leases are generally easier to get and flexible as compared to loans, which on the other hand is a time consuming task to get.

5) Upgradation of equipments - Lease option can adress the issue of Obsolescence. In case of assets which get outdated in short span of time, we can get the lease term for short term, for eg. - Laptops.