Pros 1. Like a business-owned asset, the leased asset will also reflect as part of the entity's total assets on its balance sheet. Therefore, this arrangement increases the asset base of the entity. 2. Again, the interest portion included in the lease rental will find its place in the profit and loss account. And the tax benefits can be availed by the entity like an operational lease. 3. Moreover, as with owned assets, the business can continue to charge the depreciation on the leased assets. And thus, continue to enjoy the tax benefits, which is not possible in an operational lease. Cons: The capital lease also has certain negatives too. As the asset base increases, the efficiency ratio in terms of - the Asset Turnover Ratio or Fixed Asset Turnover Ratio goes down. And that may not look good for the entity. Read Benefits and Drawbacks of Capital Lease for more details.