Leasing Information

WHAT IS LEASING?
Leasing is a method of paying for the use of an equipment such as a car, truck, or any manufactured instrument over a specified period of time. Sounds like renting, but the two concepts are not to be confused because they are very different. While you can rent a car for as little time as a day, or even a few hours, leasing typically starts at 24 months and does not provide for easy termination or vehicle swapping.


ADVANTAGES OF LEASING FINANCE
Leasing finance is an alternative method for financing the acquisition of the basic means of production and has the following advantages:

• Does not need a huge initial investment–leasing companies may require from the lessee an advance of 10-30 percent of the equipment cost.
• Is more affordable–the decision pertaining to the implementation of the leasing arrangement is mainly based on the ability of the lessee to generate enough cash flow to pay lease rentals.
• There is no need for a collateral/security, although in some cases, the lessor may request for additional security.
• There is minimal regulation for leasing companies

BUY OR LEASE?
Buying a car with a loan is similar to putting money into a declining-value savings account—you never get out as much as you put in. A portion of every payment you make is lost to depreciation. What you have "to show" for your investment when your loan is paid off is only the part that is left over after depreciation–a terrible investment by any measure.

However, leasing is similar to buying, but without the declining-value savings account. You only pay for what you use and will own nothing at the end of the lease.

With leasing, you at least have the option of putting your monthly payment savings into more productive investments, such as mutual funds or stocks that have the possibility of increasing in value. In fact, many experts encourage this practice as one of the benefits of leasing, although most people will typically find other uses for the money they save while leasing, such as paying rent or buying groceries.

Learn more about leasing ... [pdf]