A host of innovations characterizes the modern market economy. This includes new forms of business, new forms of business practices and organizations. In addition to franchising, factoring, forfeiting, leasing too is a market innovation. The company or entrepreneur must possess certain means to making a profit. It is enough to dispose of the right to use the asset over time.
What Leasing Means
Leasing arrangements enables easier, faster and cheaper ways of getting the equipment. This helps particularly in terms of the lack of own capital, lack of favorable bank loans, non-functioning of the rule of law, as well as due to tax incentives. Users of these lease arrangements provide financing for the purchase of the right of use of the leased object. This right lasts to the expiration of the contract. Additionally, the owner transfers the right of ownership to the user only after payment of the last installment.
Leasing can be defined as a written agreement between the two parties: a leasing company (lessor) and user equipment (lessee). In this transaction, the lessor purchases the equipment from the supplier and provides the use of the lessee for a limited period. In return, the lessee is obliged to return the provider performs periodic payments under the conditions defined in the contract. Thus, the lessor retains legal ownership of the leased asset, while the lessee acquires the economic ownership.
Types of Leasing
Financial leasing is the conclusion of long-term contracts in which the user of leasing agrees to make payments so that the total amount of each installment exceed the amount of the purchase price on the matter, so-called full-pay-out contract. In addition, the term of the lease is 70-90% of the expected lifetime of these things, so it is logical that the data point after the expiry of this deadline can not be leased to someone else (because it is worth much less). It is always the fact that the mobile-consumable things are in the game. This includes equipment, vehicles, machinery, computers. User bears all the costs and risks associated with the equipment. Cancellation of such a contract is not possible.
Operational leasing is short-term and cancellable at any time. Contract duration is shorter than the economic life date equipment, and the fee is less than the value of the equipment. All costs and risks borne by the provider. This includes the risk of accidental destruction of things, obsolescence, insurance costs, maintenance, supply of spare parts, personnel training, technical assistance. With operating lease, after expiration of the lease term, the customer returns the leased asset to the lessor.
Leasing in Practice
In a direct lease (leasing or manufacturers), the lessor is also the producer of the things that is given on lease. For example, a car manufacturer gives to lease a car directly to a citizen or a company. This lease is very similar to the sale of the loan, except that here usually does not come until the transfer of ownership rights over such things.
In the indirect lease the lessor is not at the same time the manufacturer of these things. The lessor is instead a leasing company. This can be a bank or a company that specializes in providing leases. They conclude two contracts: one with the manufacturer, and one with the lessee.
Leasing of movable property subject to the lease has usually equipment. This can be a plant lease, where the lease provide whole plant. Equipment leasing is the lease of individual equipment. The Second Hand Leasing is the lease gives thing that has already been given on lease, and is returned after the deadline provider (of course, provided that this thing continues to have practical value, ie. It can be used). Leasing immovable property is a situation when the lease give the real estate, building.