Pakistan study notes for Matric, Intermediate, B.A, B.COM BSC, M.A, BCS. Free Pakistani Urdu educational school, colleges and University notes.

DISADVANTAGES OF LEASING

DISADVANTAGES OF LEASING

Leasing entails some demerits also:

 

High Cost

The first and foremost disadvantage of the leasing is its cost. The rentals paid on it is higher than the rate of interest on borrowings.

 

No Right on Residual Value

Although the lessee fulfills his responsibility of fully amortizing the cost of the equipment, its residual value belongs to the lessor. The lessor enjoys this benefit at the cost of the lessee. An example of building and land on which it is raised may be given here.

The building at the end of the lease period may be fully depreciated and amortized but the land with the higher value goes back to the lessor.

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