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What is Leasing
Leasing is a type of financial service that belongs to the category of foreign sources of funding.

Leasing is a type of financial services that belongs to the category of foreign sources of funding. It is a long-term or short-term lease (rental) of tangible or intangible assets or rights. For a fee (or non-monetary benefits), the lessor provides the right to the lessee to take over the subject of the lease for the lease period.

For leasing, it is typical that the leased asset is, for the duration of the lease, in the property of the lessor. The lessee has the right to use the leased asset.

Basic types of leasing:

The lessor is usually a bank or a leasing company.

Main advantages:

  • There is no large one-time expenditure of funds
  • Lease payments are tax deductible (as payment for services)

Main disadvantages:

  • Leasing is more expensive than a single acquisition of the asset (because it includes not only price of the asset but also profits of leasing company)

Leasing in practice: Companies use leasing as one way of external financing, especially due to the transfer of risks to the lessor and cash flow optimization.

Related terms and methods:

Related industry / sector:

Related management field:

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Last update: 12.06.2018

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