Identify four benefits of a lease to the lessee and two benefits to the lessor
Four benefits to the lessee are:
(1) tax savings from the ability to deduct all lease expenses and/or the ability to transfer tax deductions to a lessor who can obtain more value from them and pass on the savings,
(2) cost savings from the lessor’s expertise and economies of scale,
(3) the ability to transfer the risk of the asset’s obsolescence to the lessor, and
(4) the flexibility of 100% financing without many of the formalities of a comparable bank loan.
Two benefits to the lessor are:
(1) the ability to make a profitable “loan” to the lessee, and
(2) a superior position should the lessee default on its lease payments since the lessor owns the leased asset.