When investing in investment goods, many businessmen are faced with the dilemma of which method of financing to choose. Buying on credit used to be the most popular method, but in the last ten years lease as a method of financing has grown tremendously.
The lease is defined in International Accounting Standard (IAS 17)-Lease-" an agreement under which a lessor transfers to a lessee, in exchange for a lease, the right to use an asset for an agreed period."
According to the above definition, it can be concluded that a lease is a special form of medium-term and long-term financing based on use, instead of owning the subject of the lease.
The key difference between lease and rental is that it is a three-way legal transaction, so the subjects in the lease are:
*manufacturer or supplier of the leased object,
*financial institution, leasing company, or lessor
The lessor procures a certain item from the supplier of the leased object and hands it over to the lessee to use and the lessee undertakes to make a series of payments to the lessor during the term of the lease.