This lesson describes various aspects of the lease vs. buy decision. It lists advantages and disadvantages of leasing and provides a format for comparing the costs of each options. A lease is a long term agreement to rent equipment, land, buildings, or any other asset. The lease payment covers the original cost of the equipment or other asset and provides the lessor a profit.
Financial leases are the most common by far.
A financial lease is usually written for a term not to exceed the economic life of the equipment. Computer equipment is often leased under this kind of lease. The sale and leaseback is similar to the financial lease. The owner of an asset sells it to another party and simultaneously leases it back to use it for a specified term. This arrangement lets you free the money tied up in an asset for use elsewhere.