- It is important source of credit under which lease company plant or which lease company purchase plant or equipment and required to pay lease rent on that assets. Leasing is essential for contract for specific equipment where lessee, who is the user of equipment, selects the equipment, acquire on lease and allow the use of equipment.
- Leasing involve lessee, lesser, lease period, rental payment, additional rent, purchase option.
- Leasing permit increase capital investment with income tax consideration.
- It also provides ability to maintain flexibility by avoiding ownership commitment.
- It is a cheaper source of finance.