Question

What benefits and drawbacks are associated with leasing? (typing please,thank you)

Answer 1

Benefits of leasing:
1. It requires less cash outflow during initial investment .
2. There is tax benefit as lease is shown as expense.
3. In case of operating lease the maintenance expense is not required.
4.The risk of machine getting worn out or obsolescence is not there in leasing.

Drawbacks:
1. Lease payments could be very high and in some cancelling lease contracts could be expensive.
2. In case of financial lease maintenance expense needs to be borne.
3. Depreciation allowance  option is not there as the ownership of equipment is not there.