Leasing arrangements can take a variety of forms. Manufacturers and dealers may engage in leasing as a marketing tool, and such leases may be either relatively short-term operating leases or full-payout leases representing, in effect, installment sales of the product. There are also leasing companies that purchase equipment under lease from the manufacturer-dealer; their risk may be primarily in the credit of the lessee or seller, or they may take substantial risk in the residual value of the property. Financial institutions or other lenders may use leasing as a method of providing financing for property acquisitions by lessees. Lessors may provide ancillary services such as maintenance and repairs, and may even be responsible for operation of the property; such lessor involvement is most likely to be found in operating leases, but it can also occur in leases that involve substantive financing arrangements.
From the standpoint of the lessee, a lease may provide greater flexibility and less risk in specific property, although at a higher cost, than property ownership. Even leases in which the lessee assumes substantially all the risks in the property may provide certain advantages over outright ownership, including the ability to finance all of the property ownership and to benefit from certain tax attributes utilized by the lessor that might otherwise be lost. If the lease requires the lessee to forgo residual value, however, that can be a quite significant disadvantage in an era of persistent inflation. The possibility of achieving off-balance sheet financing has been traditionally considered one of the primary attractions of leasing, although whether this really affects decisions of shareholders, lenders, financial analysts and credit rating agencies remains a point of considerable debate.
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