Leasing is a common term in today’s economy. Chances are you or someone you know has signed a lease of one form or another.
However, many people never take step back to understand what a lease is.
Before you sign on the dotted line, it’s wise to have some fundamental knowledge such as the definition of a lease and the most basic answer to “what is a lease?”
What is a Lease?
What is a lease? A lease is a contract that rents land, property, services, or goods to another for a specific period of time. In return, the lessee provides compensation in the form of a fee. Individuals often lease housing and cars, while businesses can lease commercial property and even equipment.
Whenever you rent something, a lease is typically involved.
A lease is meant to protect both the tenant and the landlord from damages and to ensure both parties uphold their agreed upon obligations. If either side breaks the lease terms, the contract is no longer binding. Legal action and financial penalties may result from a breach of lease terms.
The Most Common Types of Leases
The most commonly known forms of leases are for real estate and cars. When renting property, landlords and tenants sign lease agreements. Property types that can be leased include residential, commercial, industrial, land, and even advertising space, such as a billboard.
Tenants may include anyone looking to live in a residential space, a retailer looking for a place to run their business, a business or service provider establishing a location-based practice, or a company leasing advertising space.
A car lease allows you to purchase a car without paying the full purchase price. The lease agreement sets the number of years – the lease term – over which time you pay for the depreciation in car use, usually on a monthly schedule.
The Economic Advantages of Leasing for Businesses and for Individuals
Regardless of what the lease contract is for, leasing is often a more desirable option in times of economic turmoil. It also provides access to goods that might be too expensive to purchase outright.
Leasing can save money and improve cash flow. Leasing can also provide more freedom to the lessee: rather than purchasing outright and facing the options of re-selling or discarding the goods, the lessee can trade in for a new and improved version after the lease contract expires. With such rapidly evolving technology in today’s modern economy, leasing is an attractive option for many.
Advantages of Leasing for Businesses
For businesses who need to keep up and accommodate changes in business needs, leasing is a valuable option. Businesses may reap tax advantages of leasing as the monthly payments may be treated as a business expense. Equipment leasing is a major key in modern business operations. The Equipment Leasing and Finance Foundation produces industry reports that analyze trends in capital spending and economic growth as it impacts business equipment.
Advantages of Leasing for Individuals
For individuals who may not be living in one location for the long-term, leasing is an excellent option. Leasing allows them to pay rent to the landlord to live in that housing property for a short time period. It also reduces cost of entry into a particular area – rather than saving up for a down payment and a mortgage, renters can relocate with more monetary freedom. Car leases also allow individuals to trade in and upgrade their vehicle far more frequently than they otherwise would after purchasing a vehicle.
Leasing in Today’s Economy: Focus on Fair XChange Leasing
While the practice and structure of leasing does not change based on industry or product, leasing itself is being applied in novel ways. Notably, companies like Fair and Uber’s now defunct XChange Leasing are meeting customer demand for freedom and flexibility. In a new partnership, Fair and Uber are opening access to the share ride industry to help drivers access quality vehicles.
In January of 2018, Fair and Uber announced a new partnership. As part of the deal, Fair is acquiring Uber’s XChange Leasing contracts and vehicles. The startup purchased Uber’s XChange Leasing portfolio as Uber looks to find a more profitable path.
Fair offers an innovative, flexible type of car ownership. It offers customers freedom by eliminating the traditional long-term commitment of financing or leasing. It provides a simple, affordable, and transparent end-to-end experience for drivers all from their smartphone.
The Takeaway: Leasing Provides Financial Benefits in Today’s Economy
In today’s fast-paced, constantly evolving economy, consumer demand trends more toward short-term contracts and more freedom and flexibility. Leasing provides an economical advantage for both consumers and property-holders looking to maximize these benefits of today’s modern economy.