Financial Terms Glossary

Ownership - Risks

Formal

The risks of ownership over and above renting or leasing.

1) Why own an asset for the whole of its useful life when you only need it for a period?
2) Let a rental partner maximise its second hand value - that's not our core business
3) Use the cash from purchase for working capital to expand business faster.
4) Tax breaks exist for leasing.

Informal

Owning an asset is not always a good idea. Why tie up money in physical equipment or infrastructure if these funds can be better used elsewhere. Also the company may be short of funds, and using leasing or equipment finance may be a cheaper form of funding that going to shareholders for more. Technical obsolescence - risks exist that new models may render our fully owned equipment worthless. Lease or buy is not such a simple decision after all.

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