From the course: Accounting Foundations: Leases
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Owner/Seller/Lessor: Pros and cons of a lease
From the course: Accounting Foundations: Leases
Owner/Seller/Lessor: Pros and cons of a lease
- Owner company owns a piece of equipment. User company wishes to acquire the equipment for use in its operations. One way for owner company to transfer the exclusive right to use the equipment is through a lease. Now, every situation is different, but there are four primary advantages to owner company of leasing over traditional selling. Increased sales, ongoing business relationships, residual value retained and more profit per customer. So let's first talk about increased sales. Because of lack of money, or fear of the risks of ownership, potential customers may be unwilling or unable to purchase property. By offering potential customers the option of leasing its products, a manufacturer or dealer may significantly increase its sales volume. Next, ongoing business relationship with lessee. When property is sold, the purchaser frequently has no subsequent dealings with the seller of the property. In leasing situations however, the owner seller, and the user…
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