The equipment may -be easier to obtain, if credit is already strained. Some' leasing companies have buy.-back agreements with manufacturers or disposal departments. Therefore, a certain lessor may be more willing to take a higher risk. While there are these advantages,and perhaps more, there are two major disadvantages to the smaller lease. The lessee will probably pay more for the lease than if he buys the equipment and finances through a bank loan.
Small loans carry a high rate because of the high cost per dollar involved in writing the loan.
But small leases may be even higher. This is an added cost, especially if the lease was a full pay-out lease. During an inflationary period, the lessee may be giving up the appreciation in value of the equipment. There is no way to generalize on whether it is better for a small business to lease or to buy, it would depend upon whether the advantages outweigh the disadvantages. The only way to make an intelligent decision is for the small business to understand all of the aspects of the lease, especially when some of the provisions of the lease may pass the burdens of.ownership to the lessee.