Tuesday, November 25, 2003

Finance Leases

(Fiscal arrangement)

JAMES says:

A finance lease is a form of raising capital for an expensive asset. Rather than paying rent to simply use the asset (an operating lease), the company takes on the risks, such as maintenance, and rewards of the item, and the payments made are treated as the servicing of finance. This can often be cheaper than using a bank loan or other type of finance to buy the equipment, though the company cannot then raise further finance using the asset as collateral. Finance leases obviously aren’t appropriate in all circumstances, but if the asset is needed in the long-term they are certainly worth keeping in mind.


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