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Kinds of leasing

On term of use of property and the conditions of amortization connected to it distinguish: leasing and, accordingly, with full amortization of property when term of the contract is equaled to normative service life of property and occurs to a full recoupment full payment leasing giving costs of leasing property; leasing with an incomplete recoupment and, accordingly, incomplete amortization of property at which term of the contract less than normative service life of property, and during his action pays off only a part of cost of leasing property. Last attribute — term of the contract and a degree of a recoupment (amortization) of leasing property is one of the basic criteria of differentiation of leasing on financial and operative.

Financial leasing

Leasing transactions of this type represent operation on special purchase of property in the property and his subsequent delivery in time possession and using for the term of, coming nearer on durations to term of his operation and amortization of all or the most part of cost of property. During term of the contract leasing giving due to leasing payments returns to itself all cost of property and receives profit on the financial transaction.

The basic attributes describing financial leasing, will consist in the following:

  • leasing giving  gets property not for own use, and specially for his transfer to leasing;
  • The option of property and his seller belongs to the user;
  • The seller of property knows, that the property is specially got for his delivery in leasing; the property is directly delivered the user and is accepted by him in operation;
  • Complaints on quality of property, his completeness, correction of defects in a warranty period leasing taking directs directly to the seller of property;
  • The risk of casual destruction and damage of property passes to leasing taking after signing the certificate of acceptance of property in operation.

Financial leasing has some various kinds which have received the independent name.

Classical financial leasing is characterized by tripartite character of mutual relations and compensation of full cost of property. Under the application leasing taking leasing giving gets from the supplier the necessary equipment and transfers it in leasing leasing taking, compensating the financial expenses and receiving profit through leasing payments.

Returnable leasing

A version of leasing transactions is "returnable leasing". As a matter of fact it represents the bilaterial leasing transaction. Feature of a similar sort of contracts of leasing is that leasing taking is simultaneously and "supplier" transferred to leasing the equipment, in other words, the proprietor of the equipment sells his leasing company and simultaneously concludes with it the contract of leasing on the same equipment in quality leasing taking. The transaction is made in the following sequence:

1 — enters into the leasing agreement between leasing giving and the tenant;

2 — the leasing firm buys the equipment from the tenant — the proprietor of the equipment;

3 — the tenant on a regular basis pays rent payments according to conditions of the leasing contract.

Advantages of such transaction to the initial proprietor, and subsequently leasing taking the equipment will consist in the following:

  • It can resort to services of the leasing company in cases, already after purchase of the equipment when became obvious, that derivation of significant means from a revolution on purchase of this equipment has resulted or can lead to deterioration of his financial position;
  • It receives full cost of the equipment from the leasing company, returns spent on purchase of the equipment of means, keeping thus behind itself the right of possession and using this equipment;
  • It can negotiate with the leasing company (which can sometimes borrow long time) already having the equipment necessary for it and using it.

Except for that:

  • Rent payments are subtracted from the sum of the taxable profit of the enterprise and are taken into account, as the current operative charges;
  • From the tenant it is required to present smaller than at reception of the bank credit additional guarantee maintenance of the transaction (actions, bonds, the bank guarantee or any other forms of guarantees).

Thus, even those companies which at the moment of purchase of the equipment for any reasons did not want, could not or simply did not know about opportunities of leasing, have an opportunity to use all his advantages (including the accelerated amortization, reference of leasing payments on the cost price, etc.) already after purchase of the equipment. This scheme of leasing is frequently used with the purpose of reception of the tax privileges stipulated for the contract of financial rent.

At last, returnable leasing frequently is the most effective and rather cheap way of improvement of a financial position of the enterprise. The size of rent payments at the given kind of leasing depends basically on the current cost of the credit and cost of the rented equipment minus amortization.

The difference between a purchase price of the equipment and by his realization leasing giving usually is not paid to the tenant, and it is taken into account in amortization, or is proportionally distributed through rent payments. In case the market price at the moment of the conclusion of the transaction is lower, than not amortized residual cost of the equipment, a difference is taken into account on balance of the tenant as losses. The important advantage of returnable leasing is use of equipment already taking place in operation as a source of financing of builded new objects.

Returnable leasing enables to finance capital investments with smaller expenses, than through attraction of bank loans, especially if solvency of the enterprise is put by the financing organizations under doubt in view of an adverse parity between his authorized both extra funds and an opportunity to receive additional extra means, only under brave (higher) loan percent. It is necessary to emphasize also, that the given leasing is a source sredne-and long-term refinancing while commercial bank credits are given out, as a rule, for the term of in 1,5 years with necessity of their consecutive renewal.

Leveredzh (credit, share, separate) leasing or leasing with additional attraction of means the most complex as it is connected to multichannel financing and is used, as a rule, for realization of expensive projects.

Distinctive feature of this kind of leasing is that leasing giving, buying the equipment, pays from the means not all his sum but only a part. It takes other sum in the loan from one or several creditors. Thus the leasing company continues to use all tax privileges which pay off from full cost of property.

Other feature of this kind of leasing is that leasing giving takes the loan for the certain conditions which are not so characteristic for domestic financial-credit attitudes. The credit undertakes without the right of the reference of the claim on actives leasing giving. Therefore, as a rule, leasing giving makes out for the benefit of creditors a pledge on property before repayment of the loan and concedes to them rights on reception of a part of leasing payments on account of repayment of the loan.

Thus, the basic risk under the transaction creditors — bear banks, the insurance companies, investment funds or other financial establishments, and as maintenance of return of the loan leasing payments and property handed over in leasing serve only. In the West more than 85 % of all large leasing transactions are constructed on a basis leveredzh leasing.

Leasing the help on sales represents realization of selling of property with use of leasing on the basis of the special agreement made between the supplier (seller) of property and the leasing company. These agreements have various forms. In the elementary case the name of the leasing company, its address, phone and the basic conditions of leasing are specified in promotional materials of the supplier, and all questions on leasing property with the potential user directly are solved by the leasing company. However more often the agreement between the supplier and the leasing company provides an opportunity of the conclusion the supplier on behalf of the leasing company of the leasing contract. Thus in the agreement between the supplier and the leasing company it is stipulated, that in case of bankruptcy leasing taking the supplier is obliged to redeem property at the leasing company.

Subleasing

Frequently leasing is carried out not on a straight line, and through the intermediary. Schematically it looks so. There is the basic leasing giving which through the intermediary, as a rule, also the leasing company, leases the equipment leasing taking. Thus in the contract it is provided, that in case of time insolvency or bankruptcy of the intermediary leasing payments should act to the basic leasing giving. Similar transactions have received the name "subleasing".

In the international sphere the subleasing transactions which have received the name "a double dipping" (double dipping), use a combination of tax benefits in two and more countries. Efficiency of such transactions is connected by that from tax privileges, for example, in the Great Britain is more than benefit if leasing giving of the property has the right, and in the USA — if leasing giving of possession has the right. Taking into account the given features, the leasing agreement can be constructed under the following scheme.

The leasing company in the Great Britain buys the equipment (property right) and gives it to leasing the American leasing company (the right of possession) which in turn transfers them in leasing local leasing taking.

Operative leasing

This kind of leasing is applied at small terms of rent of the equipment, at which duration of life cycle of a product much more than contract term of rent. At operative leasing the equipment will not completely be amortized during rent, and can be again leased or returned leasing giving. In practice of the transaction of operative leasing do not exceed the three-year period. The tenant in the given transactions reserves the right to cancel the contract under condition of the prior notification leasing giving. This form of leasing provides the big responsibility of the tenant for safety of object of rent. The tenant incurs the obligation independently to conclude contracts with the firm-supplier on repair and maintenance service of the equipment.

For operative leasing the following attributes are characteristic:

  • Term of the contract of leasing much less than normative service life of property owing to what leasing giving does not expect to compensate cost of property due to receipts from one contract; the property in leasing surrenders repeatedly; in leasing surrenders not specially got under the application leasing taking property, and available in the leasing company. Differently, the leasing company, getting property, does not know his concrete user. In this connection the leasing companies specializing on operative leasing, should know well market condition of leasing property — both new, and second-hand;
  • Duties on maintenance service, repair, insurance lay on the leasing company;
  • leasing taking can terminate the contract if the property by virtue of unforeseen circumstances is able to, unsuitable for use;
  • The risk of casual destruction, loss, damage of leasing property lays on leasing giving;
  • The sizes of leasing payments at operative leasing are higher, than at financial leasing as leasing giving should take into account the additional risks connected, for example, with absence of clients for repeated delivery of property, possible damage or destruction of property;
  • Upon termination of term of the contract the property, as a rule, comes back leasing giving.

At will leasing taking has the right to prolong the contract on new conditions and even to get it in the property. If financial leasing on the economic essence can be compared to long-term financing capital investments at operative leasing rent payments are comparable to the current operative charges.

Formation and development of the given kind of leasing becomes possible with the advent of the secondary market transferred to leasing the equipment as at leasing giving there is a problem of realization of property upon termination of term of leasing. This new problem causes of work in the field of management of property and resale of the property which has come back to leasing giving.

Leasing giving is compelled to hand over transferred to leasing the equipment in time using some times and for him the risk on compensation of a residual project cost of leasing grows at absence of demand for him. The risk connected to management by property, is not limited to a problem what to do with property upon termination of term of leasing — at operative rent term of the contract seldom it happens is commensurable with term of "life" of property. Growth of the market of operative rent is caused by that leasing giving search new opportunities in area outside of balance financing, protection against the risks connected to residual cost and reduction of periodic payments. Leasing giving under pressure of a competition volumes of payments are compelled to expect on the basis of the profit after the taxation and to transfer tax privileges of possession of property on the tenant in the form of reduction of leasing payments. The property which is handed over in operative rent, is various: From automobiles (this kind of property first of all dictates necessity of creation of the "secondary" market) up to computers to which the risk of technological obsolescence is connected.

In spite of the fact that practice of operative leasing has already appeared, there are doubts concerning conformity of this concept to the Russian legal base. In opinion of many experts, according to an item of an item 665-670 civil codes the Russian Federation , the leasing transaction can be made concerning this or that equipment only once — at the moment of his purchase leasing giving for leasing taking. In a case when the subject of operative leasing comes back leasing giving (or for it is required to them before expiry of the term of the termination of the contract of financial leasing), this subject again transferred to rent, will be a subject of the current rent. Thus there is a transformation of leasing attitudes into attitudes concerning the current rent. Thus, operative leasing is well-known all rent.

Wet and pure leasing

On volume of service of transmitted property leasing is subdivided on "pure" and "wet".

Wet leasing (wet leasing) assumes obligatory maintenance service of the equipment, his repair, insurance and other operations for which bears the responsibility leasing giving. Except for these services, at will leasing taking leasing giving can undertake duties on preparation of qualified personnel, marketing, delivery of raw material, etc. If maintenance service of the equipment, his repair, insurance, etc. lay on leasing giving speak about "the leasing including additional obligations" (wet leasing). By a subject of such kind of leasing, as a rule, happens the complex specialized equipment. Wet leasing usually use or manufacturers of this equipment, or the wholesale organizations; financial establishments and banks seldom address to this kind of leasing as at their order there is no necessary technical base.

In connection with that in Russia for the present there was no market of leasing services and practically there are no leasing companies which could provide qualitative maintenance service of objects of the leasing, the most widespread kind of leasing is pure. Pure leasing (net leasing) are attitudes at which all service of property incurs leasing taking. Therefore in this case charges on service of the equipment are not included in leasing payments. Banks, the insurance companies and other financial organizations engaged in leasing business participate in attitudes of "pure leasing".