ADVANTAGES OF LEASING

Leasing of assets is more advantageous to the lessee, for lessee to make full use of the assets without
1 making immediate payments
2 Leasing enable the lessee firm to shift the burden and cost of obsolescence on the lessor.
3 A company with a limited financial resources can acquire assets on lease for its expansion program.
4 Lease financing is regarded as more convenient form of financing than debt financing.
5 Leasing gives a lessees firm to increase and strengthen its borrowing capacity
6 Leasing avoids raising of equity and thereby prevent the cost of raising additional capital
7 Leasing offers certain tax advantage to the lessee
8 The risk of obsolescence of asset is reduced
9 Leasing facilitates more flexibility than ownership
10 Leasing helps the manufacturers/suppliers to increase the sales of their equipment’s
Lease financing offers 100% finance to acquire the use of assets without nay margin money provided
11 by the lessee
12 It facilitates additional source of financing
13 It provides facility to the lessees that are needed only temporarily
14 It enhances the financial soundness of the concern
15 Leasing helps the lessor to claim depreciation on the investment made in leased assets

DISADVANTAGES OF LEASING
1 Under lease agreement, the lessee does not get ownership of the asset
2 Long-term leasing of asset is generally more expensive to the lessees
3 High overhead expenses provide additional burden to the lessee
4 No protection against manufacturer's/suppliers' warranties on the part of the lessee
5 In a lease agreement, any residual value after the basic lease period goes to the lessor
6 Interest cost of leasing finance is generally higher than that of cost of borrowing
7 Inadequate lease evaluation and improper documentation due to habitual leasing
On accounts of lessee's default, the lessor may terminate the lease and takeover the possession of the
8 leased asset.