Leasing - an alternative to cash and loan purchases

Service Business

Leasing contracts are more and more often concluded by entrepreneurs. They are one of the main forms of financing business activity. In recent years, it can be especially noticed that entrepreneurs who have the choice of leasing or credit increasingly decide to finance through leasing.

Leasing - what is it?

Leasing is one of the modern methods of acquiring fixed assets, which is characterized by the lack of the need to incur the entire expenditure for the purchase of a specific item at one time. Therefore, it is an alternative to a bank loan and larger cash expenses. It is a popular form of raising capital for both stable and newly established enterprises.

The leasing contract has been included in the Civil Code - it should be prepared in writing under pain of nullity. According to the indicated provision, under the leasing contract, the financing party undertakes to purchase the agreed item from the selected vendor under the conditions specified in this contract and return this item to the user to use or use and receive benefits for a specified period of time. The user of the item is obliged to pay the lessor a monetary remuneration in the installments agreed in the contract. Ultimately, the payment amount of all salaries should be at least equal to the price at which the item was originally purchased by the financier.

In fact, an item that is leased out will certainly be more expensive than buying it once for cash. However, on the other hand, leasing allows you to keep a financial reserve that can be used for current payments or purchases. In addition, the leasing burden is spread over several years and results in an increase in tax deductible costs.

There are three types of lease which are distinguished according to future tax effects. The choice of the appropriate form of leasing depends primarily on the individual needs of the user and his financial capabilities. It is worth knowing that the discussed division is only terminological. There is no such division in tax acts.

Financial leasing

In financial leasing, the lessee's tax deductible cost is the interest portion of the leasing installment. Moreover, the lessee makes depreciation write-offs which, together with the interest part of the lease installments, are classified as tax deductible costs. This is because the leased asset is classified as the lessee's property. In financial leasing, VAT is paid in full at the first leasing installment, after the item is received. After paying the last lease installment, the subject of the contract becomes the property of the lessee.

Operating lease

In operating lease, the leased item belongs to the lessor's property. Therefore, it is he who makes the depreciation. Leasing installments and the initial payment are classified as tax deductible for the lessee. VAT is added to each leasing installment.After all installments are settled, along with the end of the leasing contract, the lessor can buy the leased object.


Reverse leasing is a special type of leasing, the least frequently chosen by entrepreneurs. It consists in linking the leasing contract with the preceding contract of sale of a specific item. Thus, the lessee sells the items he owns to the leasing company, while reserving the right of further use for himself on the terms set out in the leasing contract. In leaseback, the ownership of a given good is exchanged for a right that allows it to be used at a price reflecting its current market value.

Which leasing to choose?

Lessees most often decide to finance or operate leases. The main difference between them is the right to make depreciation write-offs, which in turn affects the amount of tax costs incurred by both parties. Operating lease seems to be a more advantageous option for smaller companies, especially due to lower initial costs. The decision to use the financial leasing option is most often made by larger enterprises and corporations. This is because in this form of leasing, the entire amount of VAT on the fixed asset that is the subject of the contract must be paid at the very beginning.

The leasing contract may be concluded for both movable and real estate. In Poland, the most common subject of leasing contracts are cars and machines. However, more and more entrepreneurs use the possibility of leasing smaller office equipment. The subject of the leasing contract cannot be intangible goods and rights, such as patents.

It is worth knowing that leasing also has disadvantages. The largest and most unfavorable consequences are related to the possibility of the lessor's bankruptcy or having unsettled liabilities towards other entities. In this case, it may be that the leased item will be taken from the lessee to pay off the lessor's other debts. This is because the used item remains his property throughout the duration of the contract. Therefore, in order to reduce the possible risk, when deciding to use the services of a leasing company, it is worth carefully analyzing its situation, credibility and financial condition.

The loss of the leasing subject may also occur due to the fault of the entrepreneur. Even a short, unexplained delay in paying installments can lead to an immediate termination of the contract. It is worth knowing that even in the event of loss of the leased asset or its deterioration, the entrepreneur is still obliged to pay the installments specified in the contract. In addition, the lessee may not demand the removal, at the cost of the lessor, of damage to the property which is the subject of the leased contract. The lessor is liable only for defects arising as a result of circumstances to which he contributed himself.