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Leasing Benefits
The exact contractual terms and conditions as well as the legal and fiscal consequences always depend on the applicable laws and regulations of the different jurisdictions. This makes talking to the experts at our local subsidiaries indispensible in order to assure that all information is accurate, relevant, complete and up-to-date.
Contractual structures are possible which are in line with the German, Austrian or European (IFRS) requirements for consolidated financial statements.
Leasing provides more financial leeway
Leasing makes it possible to finance investments without using own capital resources.* In effect, leasing offers 100% outside financing, something which is practically unheard of in the credit sector. The pay-as-you-earn principle allows you to pay your leasing instalments from revenues generated by the leasing object. Leasing thus is a way to safeguard liquidity, leave credit lines untouched and considerably increase entrepreneurial scope.
Positive effects on accounts and ratings
Leasing objects are owned by the leasing provider. In operating lease schemes, neither the leasing object nor any contractual obligations arising from the leasing agreement appear in the leasing taker’s accounts. This “balance sheet neutrality” results in an improvement of important balance sheet ratios, especially the equity ratio. This is even more important in light of the Basel II recommendations. Balance sheet neutrality has a positive effect on corporate credit ratings, facilitating the inclusion of debt in the financing mix and lowering the borrowing costs.
A reliable costing basis with optimised cost over time
The costs incurred by leasing instalments can be largely estimated for the entire agreed base period of the lease. Depending on the specific countries involved, the effects of interest rate changes can be partially excluded. The cost over time can be guided under consideration of the expected revenue, e.g. by agreeing non-linear instalments to allow an optimisation of the bottom line of the income statement. Leasing instalments from operating lease agreements are fully tax-deductible expenses.
Flexibility through customised contract drafting
Leasing guarantees a set of contractual terms and conditions that are in line with the needs of the business and the value development of the investment object. Flexibility is a dominant factor in setting the duration of the contract and determining the end-of-contract terms. Lease extension options can be agreed with operating lease schemes. As leasing agreements are limited-period contracts, investment objects can be replaced more quickly and more easily by new, more advanced objects.
Time and cost optimisation through extensive supporting services
Leasing becomes an especially interesting option when combined with additional services such as insurance services or full-service packages (e.g. in car fleet leasing).
*Although an advance may sometimes be required.
Source: Leasing A-Z, published by Bundesverband Deutscher Leasing-Unternehmen e.V.
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