Leasing is a widely used form of financing in Italy that allows companies and private individuals to use assets without having to purchase them immediately. Typical leased assets include vehicles, machinery, production equipment, and real estate.
In a lease, a leasing company makes an asset available for a specific period of time. The lessee pays regular lease payments and, in return, receives the right to use the asset for business purposes.
How does leasing work?
When a lease agreement is signed, the leasing company purchases the asset selected by the customer and makes it available for the customer’s use.
Throughout the entire term of the contract, the leasing company generally remains the owner of the asset. However, the lessee bears the ongoing costs of use and utilizes the asset for business or personal purposes.
At the end of the agreed term, there are various options depending on the terms of the contract:
- Returning the leased asset,
- Enter into a new lease agreement,
- Exercising a purchase option and acquiring the asset at the agreed residual value.
Advantages
Leasing can offer various advantages for companies:
- Preservation of liquidity: The investment costs are spread out over the term of the contract.
- Predictable financing: The amount of the lease payments is known at the time the contract is signed.
- Modernization: Companies can regularly deploy new vehicles, machinery, or technical equipment.
- Flexibility: At the end of the contract, a decision can be made regarding continued use based on needs.
Disadvantages
In addition to the advantages, there are also some aspects to consider:
- The lessee does not own the asset during the term of the contract.
- Total costs may be higher than with a direct purchase due to interest and fees.
- The lease agreement results in a long-term financial commitment.
- Certain contracts may include requirements regarding use or return.
Leasing or Buying?
Whether leasing or purchasing makes more financial sense depends on the individual situation. While a purchase results in immediate ownership of the asset, leasing allows for the spreading out of investment costs and can preserve the company’s liquidity.
When making a decision, particular consideration should be given to the planned useful life, financing costs, tax implications, and long-term business planning.