LEASE FINANCING

PRESENTED BY

JAGDISH SINGH SONU BAJAJ HARDEEP SHARMA

INTRODUCTION
Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an indefinite period of time (called the term of the lease). The consideration for the lease is called rent. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership

ESSENTIAL ELEMENTS OF LEASING

    

NUMBER OF PARTIES TO THE CONTRACT (a) THE OWNER OR THE LESSOR (b) THE USER OR THE LESSEE ASSET CONSIDERATION LEASE PERIOD USE V/S OWNERSHIP TERMINATION OF CONTRACT

TYPES OF LEASING

OPERATION OR SERVISE LEASE

FINANCIAL LEASE

Finance lease

Although a finance lease will look and feel the same as a hire purchase, you will not end up owning the asset at the end of the contract. Ownership remains with the finance company at all times. The agreement is structured so that you pay off the whole value of the asset. If you leasing a car worth £10,000, you will pay the whole £10,000 plus interest during the lease. If you are still using the asset at the end of the original contract, a second agreement can be entered. This secondary agreement will be for a nominal fee. You will be able to offset rental charges against profits and you are able to claim VAT as well. The agreements can be structured in different ways but you may find that you can choose when to sell the asset and, if so, get a rebate for the remaining rental charges. "Although a finance lease will look and feel the same as a hire purchase, you will not end up owning the asset at the end of the contract. "

OPERATING OR SERVICE LEASE
An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship etc.) being leased. An operating lease is commonly used to acquire equipment on a relatively short-term basis. Thus, for example, an aircraft which has an economic life of 25 years may be leased to an airline for 5 years on an operating lease.

ADVANTAGES AND DISADVANTAGES OF THE LEASING

ADVANTAGES OF LEASING TO THE LESSEE
    

AVOIDANCE OF INITIAL CASH OUTLAY EASY SOURCE OF FINANCE ENHANCED LIQUIDITY SHIFTING THE RISK OF OBSOLESCENE LESSER ADMINISTRATIVE AND MAINTENANCE COSTS

LIMITATIONS OF LEASING FOR THE LESSEE
  
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HIGHER COST LOSS OF MORATORIUM PERIOD LOSS OF OWNERSHIP INCENTIVES
LOSS OF SALVAGE VALUE OF THE ASSET PANALTIES ON TERMINATION OF LEASE NO ALTERATION OR CHANGE IN ASSET

ADVANTAGES OF LEASING TO THE LESSOR
 HIGHER

PROFITS  TAX BENEFITS  QUICK RETURNS  INCREASED SALES

LIMATATIONS FOR THE LESSOR
    

HIGH RISK OF OBSOLESCENCE COMPETITIVE MARKET PRICE LEVEL CHANGES MANAGEMENT OF CASHFLOWS INCREASED COST DUE TO LOSS OF USER BENEFITS LONG-TERM INVESTMENT

THANK YOU

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