Is A Lease A Good Idea? Everything You Need To Know
At its core, a lease is a contract between two parties, the lessee and the lessor, where the lessor (generally) retains the rights of ownership over whatever asset is used by the leasing customer.
How Does A Lease Work?
For the most part, a lease will provide the lessor the right to use the leased asset for particular purposes, depending on the type of lease. If the lessee is an entrepreneur, the lease likely allows the asset to be used for commercial purposes, carrying additional risks or even a different payment schedule.
What Are The Common Terms Of A Lease?
All leases start with a couple of standard terms, with the first being the amount of the payment a lessee must pay and the payment period. Another term that accompanies all lease agreements is the amount of time the lessee maintains the rights of usage for the asset from the lessor and a minimum leasing term.
Different Types of Leases
Merchandising Lease is where you acquire the right to use an asset that is also a general consumer good, more often than not, some type of household appliance or furniture (i.e., Rent-To-Own or WhyNotLeaseIt.com).
This is your standard lease where the lessee signs the agreement for a specified amount of time (minimum term) and can either re-lease the asset or trade it in. Whether a commercial or consumer lessee, be especially careful of the terms for this kind of lease to ensure you do not incur additional costs once the lease concludes.
If you have seen the advertisement for “rent or lease to own,” this is the type of lease that statement refers to. While you might associate the option lease more with vehicles or property, it is actually more common for merchandising assets.
Of all the different types of leases available, vehicle leases might make the most sense given the various benefits and drawbacks of the cost of ownership. One of the main reasons is the value of a vehicle depreciates with time, and the most significant drop comes at the front end.
This is your standard vehicle lease where you make an ongoing lease payment each month for the length of the contract and return the asset once the contract concludes. There is no flexibility with the mileage or depreciation costs, which ultimately creates lower periodic payments but more risk.
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