The benefits and applications of lease and rental are many and can be used for the financing of most types of equipment. Some of the advantages of this type of financing are:
- No additional security in normally required because the finance company owns the equipment during the lease/rental period,
- Normally no down payment/cash deposit = no cash effect until the equipment is in production,
- A flexible form of financing,
- Predictable monthly cost, easy to calculate,
- Does (normally) not utilize the credit facilities provided by the house bank,
- The asset can potentially port outside the balance sheet (”off-balance”) and, if so, does not affect the solidity/key ratios,
- Rental contracts / rental costs are often regarded as operating expenses (operating budget) rather than an investment (CAPEX),