UNIT IV

Steps in leasing
• Lessor decide about the type of asset required
• Lessee determine the manufacturer or
supplier
• Enter lease agreement
• After signing lessor contact the supplier to
supply the asset to lessee.
• After asset delivered lessor makes payment to
supplier.
Wrap lease:
A type of lease contract involving a third party
that buys the asset to be leased, leases it to
the leasing company, who then on-leases it to
the user.
 Advantages And Disadvantages Of
Leasing
Lessor:
Full security
Tax benefit
High profitability
High growth potential
Lessee
Financing capital goods
Additional source of finance
Less costly
Ownership preserved
Flexibility
Simplicity
Tax benefits
 Why Equipment Finance?
There are countless reasons
to use equipment leasing and finance
 Conservation of cash
 100% Financing
 Preservation of Capital
 Hedge Against Inflation
 Improved Expense Planning and Business-Cycle Flexibility
 Regular Technology Updates
 Tax Considerations
 Relationships with Equipment Experts
 Obsolescence Management
 Dependable Asset Management
 Product and Service Bundling
 Equipment Disposal
 DIS ADVANTAGES
• Lessor
– Risk of obsolescence
– Competitive market
– Price level changes
– Management of cash flows
– Long term investment
• Lessee
– High cost
– Deprived use of asset
– No alteration in change of asset
– Loss of ownership
– Penalties on termination
– Loss of salvage value
 Industry Overview

WHO ARE THE PLAYERS?

Banks finance the sale or lease of equipment. Banks may offer

Banks lease financing as one of their financial products in order to provide
their customers with a full range of financial services.
Captives are companies set up by a manufacturer or equipment
Captives dealer to finance the sale or lease of its own products to end-users.
An independent leasing company is one that is not affiliated with
another company. Independent leasing companies vary greatly in
Independent the products and services they offer. They may be generalists or
they may specialize by ticket size, by equipment type, or by other
criteria.
Brokers establish a relationship with the CFO, assess their
equipment financing need, and help determine the best product
Brokers and structure to meet this need. The Broker then presents the deal
to several sources to find the best funding partner. Brokers earns
fees for services from either Company or the Funding Source.