Leasing: Advantages and Disadvantages of Leasing Leasing clearly has a lot of advantages, as well as some disadvantages. The advantages of leasing include: The lessee does not commit their (or anyone else's) financial resources to the procurement of necessary assets (equipment, facilities, real estate, consumer durables, etc.). The rental, which sometimes exceeds the purchase price of the asset, can be paid from revenue generated by its use, directly impacting the lessee's liquidity. Lease instalments are exclusively material costs. Using the purchase option, the lessee can acquire the leased asset at a lower price, as they pay the residual or non-depreciated value of the asset. For the national economy, this way of financing allows access to state-of-the-art technology otherwise unavailable, due to high prices, and often impossible to acquire by loan arrangements. On the other hand, the disadvantages of leasing include: Leasing can be an expensive way of financing. In renting, the lessors want a return on their capital, while protecting themselves from any risk arising in collection of receivables. Even given the high perceived price of leasing, however, there are benefits like those above that make it attractive. In undeveloped legal systems (like Bosnia and Herzegovina), lease arrangements can result in inequality between the parties due to the lessor's economic dominance, which may lead to the lessee signing an unfavourable contract. Leasing can be undesirable because of taxation or for other fiscal reasons, depending on the taxation policy and restrictive legislation of the country, etc.
