L e s s e e ’s pe r s pe c tive:
(1) Full extent financing of the cost of capital goods;
(2) Flexibility in payment of lease rentals;
(3) Favorable duration of lease period; (4) Medium term finance;
(5) Piecemeal
financing device. (6) Keeping working capital free
(7) Lease
as a revenue expenses
(8) Procedural convenience
Lessor’s
perspective:
1. Better security; 2. Tax planning; 3. More profitable; 4. High return on equity;
5. No entry barriers.
6. Facility in accession public deposits
Unfavorable aspect of lease finacing or
Disadvantages of Lessee/Lessor:
1. Deprivation of equipment 2. Consequences of default 3. Inadequate protection against loss 4. Loss of terminal value
5. High interest cost 6. Loss of residual value 7. Lack of freedom to make changes
Risks associated with leasing:
The following risks are
associated with lease:
(1) Default risk. (2) Credit risk (3) Risk changing taxation law
(4) Risk of bankruptcy
(5) Acceleration of rents and other due amounts (6) Risk of residual value (7) Risk of war,
physical damage of asset etc.