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Leasing is a process by which a person rent property to another person with the rental contract. Lease has the same meaning as rent. Lessor and lessee are the main character in the process of leasing. Lessor
Lessor is the owner of the property and assets. The lessor lease their assets or property under a agreement and contract to the lessee. The lessor will receive the payment from lessee. They are also called as ‘landlord’ in the category of property and real estate market.
Lessee is the party who lease assets or property from lessor. They need to pay a certain amount to the lessor before obtain the assets or property. They can use the property without paying a big amount of cash and extra debts. Besides that, they are required to sign an agreement or a contract before they obtain the property. The lessee also called as ‘tenant’. Lease
The contract between the lessor and the lessee is lease.
It is a document that contains the agreement that the lessor lend their assets and property to the lessee. There are 2 type of leases, which are operating or general lease and financing or capital lease. An operating lease is a short-term lease agreements, it does not recorded in the lessee’s balance sheet. The lessor is responsible for the service and maintenance of the assets and property. Besides that, the lessor is usually lease their assets and property to various lessee in the economic life. For examples, the lease of real estate and manufacturing equipment. For the financing lease, it is a long-term lease agreement and recorded in the lessee’s balance sheet. Financing lease is usually responsible more assets and property in economic life. Advantages of leasing
* Tax benefit The total lease rental counts as a tax-deductible expenses. The corporate income usually deducted the lease payment. * 100% financing The lease cover all the equipment costs, which mean no money charges and down payment require. Since there is no requirement of money charges, you will have more money to invest on other things. * Flexible
The assets are flexible in leasing. If we want to do any changes on the assets and equipment, the lessor will provide flexibility to us to make the changes immediately. Disadvantages of leasing * Ownership of the assets The lessee does not have the ownership of the assets or equipment. They can use the assets or equipment but does not have an idea to purchase it. * Maintenance and repairs The lessee is responsible for the repairs and maintenance of the assets and equipment even though they do not own the equipment. Some of the leasing company offers us to include the maintenance fees in the monthly leasing costs. This action will raise you monthly payment to the leasing company. * Duration
The assets and equipment expect to use in a long period without any changes or renew. Hire purchase Hire purchase is a way to purchase goods through the installment payment over a period of time. In the hire purchase contract, the hirer does not have the ownership of the equipment before paying the full amount of the contract. After paid for the full amount, the hirer will become the ownership of the equipment. The hirer has the authority to stop the agreements anytime. Difference between leasing and hire purchase
* Assets ownership: For lease, the lessor has the ownership of the equipment. The lessee does not have the right to buy the equipment but they have the authority to use it. However in hire purchase, the hirer has the ownership of the equipment after make the full payment for the equipment. They have the right to purchase for the equipment. * Maintenance and repairs:
In lease, the lessee is responsible for the repairing and maintenance of the equipment. In hire purchase, the hirer is responsible for the maintaining and repairing of the equipment. * Duration of time:
In lease, the contract is for the bigger assets or equipment and usually use for a longer period of time. In hire purchase, the contract is for the low-cost assets or equipment and normally use for a short period of time.