Fixed asset leasing or renting is a type of arrangement in which an organization obtains the use of a fixed asset, such as machinery or equipment, for a specified period of time in exchange for regular payments to the owner of the asset. This type of arrangement is also known as an operating lease.
Fixed asset leasing typically involves the following steps:
Fixed asset leasing can be a useful tool for organizations that need to use fixed assets but do not have the necessary capital to purchase them outright. Leasing can provide access to the latest equipment and technology, with the option to upgrade or replace assets at the end of the lease period. Additionally, leasing payments may be tax-deductible, depending on the tax laws in the organization’s jurisdiction.
However, it is important to carefully evaluate the terms and conditions of the lease agreement and to ensure that the organization has the ability to make regular lease payments throughout the duration of the lease. Failure to make lease payments can result in default and the loss of the fixed asset.