Brokers who are assisting their clients with various types of leases and loans should understand the various aspects associated with these options in order to provide assistance successfully. Clients may inquire about finance leasing and its advantages and disadvantages. Finance leasing refers to a lessor buying an asset and leasing it to a lessee for a certain time frame. A lessor is an individual or group who leases money to another individual, including finance companies. A lessee is an individual who has been granted the right to use the item being leased. Finance leasing assets can include professional equipment and vehicles. At the end of the finance lease time frame, the lessee will be given the option to purchase the item they have been leasing. Finance leasing is a great option for clients looking to access expensive assets. However, clients should consider the taxes, accounting implications, and payment terms of a lease before deciding to enter an agreement with the lessor.
Leasing Advantages:
- Avoiding the hassle of reselling the leased asset when the lease term comes to an end
- Potential access to a decreased upfront cost
- Potential access to lower monthly lease repayments
Leasing Disadvantages:
- The lessee does not have ownership of the asset being leased
- Lease interest rates vary widely
- Additional leasing fees and charges
- Inflexible lease agreement terms
Clients should be informed that leasing oftentimes costs more in the long run than buying an asset outright. Researching and comparing the various types of leases can allow a client to ensure they are deciding on a lease option that works best with their finances and needs.