What is leasing?

Leasing compared with rental can be defined as follows:

The term leasing is English and means rent i.e. the transferral of specific objects for a defined time against payment. The most frequent application of leasing is car leasing which is common today. The leasing – also of other objects – often has tax advantages but above all gives the lessee liquidity advantages because he does not have to raise the purchase price.

• Rental means transferral for a defined time against payment – apart from these elements of rental, leasing in contrast also comprises financing components. Therefore, the acquisition of the leasing object after the basic leasing period expires is possible depending on the type of agreement.
  
• In the case of rental, the lessor makes the investment decision and then finds a lessee – in the case of leasing, you yourself decide on the precise leasing object you require and the requirements it should fulfil.
  
• In the case of rental, the investment object is taken over in perfect condition by the lessee. He bears the costs for repairs, maintenance and service. In leasing too, you are responsible for service, repairs and insurance.

In contrast to the rental agreement, leasing includes:

• advance financing of the investment by the leasing company
  
• leased investments are not activated in your balance sheet
  
• the leasing object is procured at the expense of the leasing company
  
• the capital goods are chosen by the lessee
  
• the supplier is chosen by the lessee
  
• the leasing object is delivered directly to the lessee
  

Leasing is also an alternative to purchasing. As we know from Aristotle: "Wealth does not lie in ownership but in the use of things!“. This is particularly true of an economic asset where use is at the forefront rather than the idea of ownership. Compared with purchasing, there is no high capital expenditure with leasing and no difficulties of resale at a later date.