What is it leasing?

   

By Mauro Libi.-   The English term leasing means "lease", it is a lease contract of movable and immovable property by a specialized company to a customer who agrees to buy it at the end of the contract.

     The small and medium-sized company (SME) has an innovative tool that allows access to machinery, equipment, vehicles and even real estate, without buy them. Through leasing there is the possibility of using a good for a certain period in exchange for a payment of a rent with option to purchase at the end of the contract. This contract will establish that you can or can’t proceed with the purchase, although it is also possible to renew the contract.

     Similar to other types of credit systems (commercial or mortgage) the client breaks the terms of the contract, the asset ceases to be leased and returns to the leasing company, bank or financial institution The leasing company buys the property in its name and then, leases it to a third part.

Leaseback is another form of leasing that has to do with those cases which the company that requires financing, resorts to one of its assets, which it should sell to the leasing company or bank, which will lease it through a normal leasing operation.

     What are the benefits of leasing?

1)      You are able to use a machine or equipment without having to buy it.

2)      You can rent with the option to buy.

3)      You can evaluate during the time of lease, how much machinery and equipment is necessary for your organization, especially during test periods, it is a very convenient system.

4)      Leasing allows the periodic rotation of equipment. As the organization will be able to operate with the latest equipment, which can lead to greater productivity.

     For disadvantages of leasing we have these aspects.

1)      The fact that you have to take out insurance on the property for the duration of the lease.

2)      The maintenance and repairs of the equipment or machinery are borne by the lessee.

3)      It will only be able to choose to purchase when the contract ends.

4)      The cancellation of the contract can lead to penalties.

5)      If the purchase isn’t made at the end of the contract, the company won’t have increased its assets.

6)      Without having to have large quantities for purchases of machinery and equipment, capital will be available for other investments.

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