The practice of leasing property, equipment or machinery, etc, has been in existence for a long time, and it involves the lessor (owner of leased asset) and the lessee.
As can be expected the lessee is under obligation to make lease payments which cover the costs associated with the use of the property for the duration of the lease. Such funds include a premium which go in the way of administrative costs like insurance and maintenance of the property, and are billed at a flat rate.
Upon the expiry or termination of the lease and there is no possibility that the lessee turns into a possible buyer or offered a renewal option, the lessor will be free with whatever he/she wants to do with the property including leasing it again.
The options of selling to the lessee or a third party, subleases to the lessee or a third party storage have the capacity to usher in recovery options.
Retail leasing comes with much more stringent conditions pertaining to a number of issues which are not necessaily dealt with in other types of commercial leasing that do not have retail component. The reason for this is based on technical considerations such as radius restrictions, continuous operating covenants among others,
A civil legal transfer of property at maturity normally requires the civil design as hire purchase contract. While a lease, which could be taken for tax purposes as a lease-purchase agreement or a hire-purchase, tends to stay civil.
On the other hand a transfer of ownership to the lessee may not be the firm agreed or probable target of a lease that has otherwise qualified for tax purposes as a lease-purchase contract.
In a lease-purchase agreement, the object is economically linked to the leases, which should naturally include the object and the obligations under the lease-purchase agreement in the balance sheet.
With a lease, the tax rules fulfilling the object is economically linked to the lessor. And the lease payments are based on monthly charges of an attachable commercial lessee, which identifies the object as either fixed assets or long term financial obligations from the balance sheet.
Leasing is a popular route with which airlines get hold of their aircraft, and aircraft leasing transactions are typically divided into finance leasing and operating leasing.
While businesses are also known to opt to lease rather than buy office equipment, including computers, and due to the fact office machines depreciate fairly quickly, leasing offers companies a more cost-efficient alternative to ownership.