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Leasing
provides a business with the opportunity of
financing its IT investment 100% without having
to tie up its own capital. This method of
funding purchases also enables the VAT component
to be pre-financed.
There are various forms of lease available:
1. Finance lease
2. Operating leasing |
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1. A finance lease is a technique for financing
acquisitions by which the leasing company purchases a particular asset based on specific instructions issued by the
future lessee and then rents it back to the lessee for a defined period which is usually between 3 and 5 years.
This gives the lessee a right to use the item in question.
The ultimate aim of the finance lease is nearly always to acquire the leased asset at some stage. The lease specifically
provides a purchase option that can be taken up or not according to the wishes of the lessee. If the lessee exercises
the purchase option, it then becomes the owner of the asset by paying an amount set in advance corresponding to the
residual value.
In a finance lease, the lessee is the owner of the asset. This means that the lessee has to include the equipment in
its assets and depreciate accordingly. This form of lease has an effect on the business’s financial ratios.
2. An operating lease is applied more to a lease provided for the sole purpose of using
the leased asset. This type of lease may not include a purchase option. An operating lease is generally entered into
for a period of 3, 4 or 5 years.
Operating leases are of particular interest for equipment that has a short or medium service life. The lessee is not
required to purchase the equipment at the end of the lease and so can renew the lease on a regular basis.
Adding equipment is usually possible at any stage of the lease. This usually results in an additional rental charge
or an extension of the initial lease.
At the end of the lease period, the lessee has three options: simply return the equipment; continue to lease it at a
reduced rental charge to be agreed with the lease company at the end of the lease; or to purchase the equipment from
the lease company, again at a price to be agreed at the end of the lease.
The lessor is the owner of the asset. The lessee is not required to include the equipment in its assets, which also
means that the equipment cannot be written down. There is no change to the financial ratios. The rental charges are
entered in the lessee’s books as operating overheads.
The lessor often provides some form of comprehensive insurance in addition to the financing arrangement.
For more information, please contact: +32
(0)2 348 61 00 or contact@waslet.be
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