Friday, March 29th 2024

What is Leasing?

Leasing is a broad term that refers to renting some asset for a specific price with a specific term using a written contract to document these terms.

Leasing property is often the largest lease that a company will enter into. Often leases for property are long term with guaranteed renewals at expiration at the option of the business paying the rent. Terms for leasing commercial property are often triple net, a phrase that means that the tenant pays the rent plus taxes, maintenance and utilities. The tenant must calculate these costs into their expense projections. Due to the long term nature of this leases, depending on the terms, the lease may be considered an asset of the business and may be sold (if allowed by contract).

Leasing equipment makes sense if the equipment in question is expensive and its useful life to the business is finite. For example, If a business needs equipment for a short term or if the equipment is only durable for a set amount of time then leasing will make the most sense.


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