There are several advantages to leasing an asset compared to purchasing it. Leases can provide less costly financing, usually require little, if any, down payment, and are oftenareat lower fixed interest ratesthan those incurred if the asset was purchased.A lease can also reduce the risks of obsolescence, residual value, and disposition to the lessee because the lessee does not own the asset. The lessor may enjoy economies of scale for servicing assets. As a result of these advantages, the lessor may offer attractive lease terms and leasing the asset may be less costly for the lessee than owning the asset. Further, the negotiated lease contract may contain less-restrictive provisions than other forms of borrowing.
Leases also have perceived financial and tax reporting advantages. The lessor may be better positioned to manage servicing the asset and to take advantage of tax benefits of ownership, such as depreciation and interest. As a result, leasing the asset may be less costly than owning the asset for the lessee.