Investing on the basis of time and usage, and not financing a purchase, reduces the risk of the asset becoming obsolescent. First, the shorter useful life of leased assets compared with purchased equipment generally reduces the risk of technical obsolescence. Second, with leasing a business can adapt its equipment to technological change more successfully and more quickly thanks to flexible structuring of the lease period – which can be an advantage in view of increasingly intense competition. At the same time, investing for a limited period motivates the lessee to review its investment and equipment plans on a more frequent basis. This is beneficial to operating efficiency.
Thanks to the flexibility in structuring of agreements, leasing provides more room for maneuver in comparison with the purchase of an asset. With the purchase option, businesses can merely decide between buying (and later perhaps selling or trading in) and not buying; leasing, however, enables a business to take its own operating requirements into account through suitable structuring of the agreement: the term, residual value, payment schedule, etc.