Leasing 101

What It Is, How It Works and Why Does It Make So Much Sense?

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Ever wonder how businesses can use the latest premium laptops, vehicles, or machinery without buying them? The answer is leasing! Leasing allows you to use a car, an office space, or even a house without owning it.

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The leasing industry has a massive $2 trillion print, globally with equipment leasing alone accounting for over 40% of the capital investment in businesses. In India, office leasing emerged as a strong market with a growth of 19% in 2024, reaching 88.52 square feet across major cities. (Source)

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Today, we will break down the ABCs of what leasing is and why it is the right choice for your business.

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What is Leasing?

Leasing is fundamentally a rental agreement between the lessor (owner) and the lessee (user) wherein the lessor provides the asset (car, machines, tech, house, anything), and the lessee pays a periodic fee to use it.

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Example of leasing –

• Businesses lease the latest tech for their employees instead of purchasing them.
• Companies lease office spaces rather than investing in real estate.
• Families lease houses rather than buying.

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Top 3 Reasons Why Business Lease Instead of Buying

• Lower Upfront Costs—You don’t need to spend a large sum on the purchase of the asset; rather, you can use the money elsewhere.
• Flexibility – Upgrade assets as per your need and want.
• No Ownership Risks – No more worrying about value depreciation or resale of the asset. You get to reap the benefits without any stress, it’s a win-win.

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How Leasing Works

Often, leasing is a very simple three-step process –

• Agreement Setup – The first step for the lessee and the lessor is to discuss, decide and finalize the terms of the contract, the monthly payment schedule and the duration of the contract.
• Usage Period – The lessee begins using the asset while making regular payments on a pre-decided amount against the asset to the lessor.
• End of Lease – At the end of the lease, the lessee has the option to either return the asset, renew the lease or buy the asset at the current market commercial value.

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Types of Leasing

There are primarily two types of leasing

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Operating lease

• Short-term, flexible
• Best suited for businesses that upgrade frequently
• Example – Businesses leasing new tech every 6 months for their employees

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Finance Lease

• Long-term, with the option to own the asset at the end of the leasing period
• Best for assets that are required to be used for years
• Example – Businesses leasing factory equipment for long-term production

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Leasing Market Segmentation

The leasing market is broadly segmented into the following categories

• By Type – Automotive Equipment Leasing, Consumer Goods and General Rental Centres, Machinery Leasing, Lessors of Nonfinancial Intangible Assets
• By Mode – Offline, Offline
• By Lease Type – Close-ended lease, option to buy lease, Sub-vented lease, other lease types

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Leasing Market Growth Forecast

The leasing market size is expected to witness a very strong growth trend in the next couple of years.  (Source)

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Leasing Vs. Buying – Which Save Your Business More Money?

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Why Do Smart Businesses Prefer Leasing Over Buying?

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• Cost Efficiency – Businesses today are focusing more on financial flexibility and leasing helps them in maintaining asset light balance sheets by reducing the amount of money spent on Capex investments.
• Tech Upgrades – IT leasing allows businesses to stay updated with the latest premium devices.
• Sustainability – Leasing plays a major role in supporting the circular economy model, promoting sustainable living by reducing e-waste.

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Conclusion

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If you need the latest technology or equipment while avoiding large upfront costs to preserve cash flow, and if you value flexibility more than ownership, then leasing comes out as a strong contender of choice.

It is a smart way to get access to high-value assets without the financial and ownership burden. With over 50% of companies opting for leasing instead of buying, it’s a clear winner in terms of flexibility and cost efficiency.

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Looking for cost-effective leasing tech solutions for your business? Check out Employee Device Leasing solution today!

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