It frees your other collateral for use in other types of borrowings. The total lease rental is tax deductible. Plant and equipment is paid from pre-tax earnings, which allows you to increase your earnings from the business. Lease finance may be available when other sources are not. Leasing charges are determined at the time the agreement is entered into, so they are not affected by subsequent changes in interest rates.
Some leases have conditions providing for variations in rental or interest rates.
You are not committed to go on using the leased goods at the end of the lease. You can buy or lease more modern plant, or undertake a further lease at possible better rates. The amount of finance provided is fixed, unlike an overdraft, so it can be structured to suit you or seasonal cash flow situation. Disadvantages The effective interest rate charged for leasing is generally higher than for other types of borrowed funds. At the end of the lease period you have no greater equity than at the start of the leasing agreement.