INTRODUCTION
Leasing model is a service compensation model in which the customer pays for continuous access to a equipment installed over an agreed period (up to 8 years).
The Leasing Company typically maintain ownership of the equipment and are responsible for delivery, install, commissioning and maintenance during the leasing period.
The Leasing Company may consider reevaluating their revenue model from a single-transaction sale to a relationship-based service contract. Leasing differs from the pay-per-service unit model in that the customer pays for continuous access to a service over a defined period instead of the number of uses.
Leasing provides a number of benefits as below:
- Payment schedules are more flexible than loan contracts.
- After-tax costs are lower because tax rates are different for the lessor and the lessee.
- Leasing involves 100% financing of the price of the asset.
- For an operating lease, the company will create an expense instead of a liability, allowing the company to obtain financial funding – often referred to as “off-balance-sheet financing”.