In general asset finance is acquirable through two routes – engage purchase and leasing. Under a engage purchase arrangement, the ownership gets transferred to the client at the end of the hiring period patch in a leasing composing the client must return the equipment back to the leasing company. In both the options, the customers must clear an agreed monthly or quarterly rental for the length of hiring/leasing period. In this article we will talk about leasing and its various aspects.

This non-transferring of the ownership is the fundamental characteristic of the engage arrangement. During the period of lease, the client pays monthly or quarterly (or whatever is agreed) to the leasing company. This rental payout is allowable from income in some cases (except for a finance lease).

Finance Leasing
This comes closest to the engage purchase option of asset financing with one field disagreement – the ownership of the asset doesn’t get transferred to the business client at any point of leasing period.

In this composing the client pays the full cost of the equipment, nonnegative the charges in the form of engage rentals over the period of the lease. The client also gets to bear risks and enjoy benefits commonly associated with the ownership without actually owning the asset – he must bear the maintenance and insurance cost of the asset and will have to treat the asset as a capital asset in the balance sheet. At the end of the engage term, commonly the asset in question is re-leased to the client at such reduced payments or is sold second-hand to an unrelated third party.

Operating Leasing
While the term for a finance engage is long, an operating leasing is commonly resorted to if the need of equipment is for a shorter period. Here the full cost of the equipment is not recovered and at the end of the engage term, commonly the equipment is leased to some other client or is sold second-hand.

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This entry was posted on Tuesday, October 6th, 2009 at 10:57 am and is filed under Branding, Business, Business Advice, Business Loans, Business Strategy. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.