Leasing Replacing Buying:

In many business markets, leasing business goods instead of buying them has become common. Industrial firms are expanding leasing arrangements to include machinery, tools, vehicles, etc. Leasing method has advantages for both the lessor and the lessee.

Advantages for the Lessor:

• Total net income is higher than the income which could be received if the equipment was sold.
• Market expansion is possible for the lessor. Industrial users who could not afford to buy the equipment may rent it.
• Leasing is a way of getting industrial users to try a new product. It is possible that they will be more willing to rent it than to buy it, especially if the price is high.

Advantages for the Lessee:

• Industrial users retain their investment capital to use other purposes;
• Firms will require less capital outlay to get into a new business than they would otherwise need if they had to buy the initial equipment.
• An added advantage is that the leased products are serviced regularly by the lessors. This eliminates the problems of equipment ownership
• One attraction in leasing is that if a firm wants to use the equipment seasonally, it can hire it during the high-season. Vehicles used in tours business are an example in Kenya.