Presented By: Presented To: Roll No# Semester Class Subject

Hassan Ijaz Asif Masood BSAF 12114 3rd BS(Accounting & Finance) Financial Management

LEASING

Definition of Leasing
Leasing is defined as A contract that allows the use or occupation of property for a specific period of time, with a specified amount of rent.

Meaning of Leasing
A contract by which the owner of land or a building agrees to let another (lessee) the use of it for a certain time on rent.

Parties involve in Leasing

Lessor

Lessee

Financier

Why Leasing is Important?

lease is a legal document containing language that spell out all responsibilities of the lessor. Leases are used for the rental of homes and apartment dwellings, as well as automobiles and other mechanical equipment.

The purpose of the lease is to spell out the lease costs.

Steps of Leasing process

Selection of Equipment Lessor is approached by Lessee Lease Agreement
1 2 3 4 5 6

Placement of order Delivery of Equipment

Letter of Acceptance

steps of Leasing process

Contract signed by parties
7

Payment of rent

After sale service

Return back of Equipment

10

How are lease and loan payments different?

Lease payments are made up of two parts

depreciation charge

finance charge

Depreciation part of each monthly payment compensates the leasing Company.

Finance part is interest on the money the lease company has tied up.

How are lease and loan payments different ?

Loan payments have two parts

a principal charge

finance charge

The principal pays off the full vehicle purchase price.

The finance charge loan interest.

Types of Leasing
Operating Lease

Financial Lease

Conveyance Lease

Operating Lease
Contrast to the financial lease
A lease agreement gives to the lessee only a limited right to use the asset. The lessor is responsible for the up keep and maintenance of the asset.

Financial Lease
Long-term, non-cancellable lease contracts are

known as financial leases. At lease it must give an option to the lessee to purchase the asset he has used at the expiry of the lease. High cost high tech equip.

Conveyance Lease
The act of transferring an ownership interest in real property from one party to another. Conveyance also refers to the written instrument, such as a deed or lease that transfers legal title of a property from the seller to the buyer.

Ijarah Islamic Lease

In Islamic Finance Ijarah is a lease contract under which lease contract under which financial institution leases financial institution leases equipment or a building to equipment or a building to one of its clients again stone of its clients against agreed rentals or agreed rentals or installments equal to the installments equal to the value of the assets. value of the assets.

Advantages of Leasing
Save from recurring cost of finance
Absence of restriction Tax benefit Increase the capacity to borrows Useful is case if fast changing technology Faster and cheaper credit

Disadvantages of Leasing
No benefit of residential value
No benefit of ownership High cost of leasing Not flexible

CONCLUSION
In leasing only tangible assets can be leased out.

Transaction in which a party owning an asset provides the assets for use over a certain period of time to another party.

THANK YOU..