Financial Leasing
Main features of financial leasing:
•leased goods carry a purchase option, involving payment of their residual value at a set price
• A leasing company purchases goods from a supplier (e.g. vendor or manufacturer) and in turn grants its clients rights of use over them
• at the end of the term, the lessee may purchase the asset
•maintenance and service of a leased good are usually conducted by the lessee
• risks and onuses arising from use of leased goods lie entirely with the lessee
• the duration of a leasing contract is directly proportional to a good's useful commercial life
• Unlike an operating lease an asset is treated as on-balance sheet
Characteristics:
•usually the lessee purchases the leased goods after paying the rest value
• the lease term is close to the useful life of the asset or piece of equipment and leasing payments almost cover the full price of leased goods
• finance leasing provides repayments to suit your needs, fast turnaround on decisions, “on” balance sheet without owning the asset, rentals are based on the full equipment cost with no residual value assumed, VAT payable on the rentals, not the purchase of the assets
Benefits:
Finance leases are especially advantageous for companies who plan to keep their equipment at the end of the lease term. In a finance lease, the asset generally appears on your balance sheet and is depreciated over the life of the lease.
When you choose to finance your equipment rather than buy it, you avoid a large up-front payment. By spreading your payments out over the lifecycle of the asset, you are able to align the equipment cost with the benefit derived from that investment. Additionally, paying fixed monthly payments means predictable expenses month to month - facilitating budget reporting and planning. Finally, when you finance your equipment with First Lease finance, your bank lines of credit may remain intact.
Key benefits
•Improved cash flow and liquidity
•Align costs of solution with benefits of the solution
•Enjoy predictability of payment streams - no surprises
•Facilitate budgeting process with fixed payments
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