What Is a Lease Extension?

Leasing refers to the behavior in which the lessor assigns the right to use the asset to the lessee to obtain rent within the agreed period. The main reasons for the existence of leasing are the following: tax saving; reducing transaction costs; reducing uncertainty. ^[1]

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Leasing refers to the behavior in which the lessor assigns the right to use the asset to the lessee to obtain rent within the agreed period. The main reasons for the existence of leasing are the following: tax saving; reducing transaction costs; reducing uncertainty. ^[1]

(1) Rental. "

Leasing in China has a long history and its origins can be traced back to primitive society (about 4000 years). At that time, the surplus of products produced the exchange of products, and in many cases people needed to exchange frequently.

Benefits of a lease to a lessee

The main characteristics of the lease include the following four aspects:

(1) Leasing equipment is generally used

Leasing can be classified from different perspectives. From the purpose of the lease, it can be divided into

Lease means that the lessor lends the leased property to the lessee for use within a certain period of time, and the lessee pays a certain lease fee in installments according to the provisions of the lease. As an emerging industry, the leasing industry has broken the shackles of traditional credit and financial institution systems and injected new vitality into the reform of the financial system. The reform of the financial system requires that financial institutions and credit methods have evolved from being relatively single and centralized in the past to diversified and diversified forms in order to form a co-existence and division of labor of various financial institutions led by the central bank and state-owned commercial banks Financial system; and adapt credit methods and financial instruments to the needs of a market economy and develop accordingly. Leasing institution is an emerging non-bank credit institution in the entire financial system. On the one hand, its establishment injected a competitive mechanism into China's financial industry; on the other hand, it also opened a gap in the old credit system, giving production companies new choices in financial and trade methods in technological transformation.

The leasing market in many domestic industries is extremely popular. China s leasing penetration rate has reached only three ten-thousandths. It can be said that the Chinese leasing market has great potential. The domestic leasing industry may involve areas such as: real estate leasing, equipment or instrument leasing, car leasing, battery leasing, aviation Leasing, talent leasing, books and audiovisual leasing, clothing leasing, toy leasing, outdoor sports equipment leasing, etc., the industry penetration is quite extensive.

Renter ^[2]

The housing leasing market is an important part of the Chinese real estate market. It revitalizes the housing stock, optimizes the allocation of resources, and invigorate the market circulation. It is becoming a new investment and consumption hotspot.

There are only more than 80 professional leasing companies engaged in construction machinery leasing with assets of more than 30 million yuan in the country, and the rest are small and medium-sized enterprises and self-employed enterprises. There are thousands of construction machinery leasing enterprises with considerable scale in developed countries. China's annual demand for construction machinery is 200-300 billion yuan, while the leasing business is only 10% of the demand, which is far from the international average of 80%.

China's car rental market is still in its infancy. Of the nearly 500 domestic car rental companies, the vast majority are small and lack the strength to resist market risks and market expansion. Among them, 80% of the companies have less than 50 vehicles in operation, 70% of the companies have less than 5 employees, and 85% of the companies have less than 2 car rental stations.

The negative impact of the financial crisis is gradually spreading to various physical industries in China, and companies have been preparing for the winter by saving operating potential and reducing operating costs. This brings opportunities for the development of technology instrument leasing companies whose services are specifically designed to reduce business operating costs. Facing various uncertainties brought about by the financial crisis, Chinese companies must consider reducing the risk of fixed asset investment. The technology leasing model is precisely to help enterprises cope with new types of services caused by various uncertain factors. Enterprises can lease expensive electronic test instruments and other equipment with very little money, which not only meets the needs of production and research and development, but also saves a lot of money. funds. The financial crisis has spurred Chinese companies to start proactive consulting and choose technology leasing services.

Leasing General Process

Provide professional market analysis, in the rental process, will also provide full agency, making house rental more convenient and faster.

1. Separate rent from water, electricity and gas. If these are included in the house rent, taxes and fees for various house leases must be applied, which is very unfavorable to the landlord. Therefore, it is stipulated in the house lease agreement that the renter should pay the relevant supply company or its agent directly according to the consumption.

2. Separate property costs from rents. If the property fee is included in the total rent, the landlord also has to pay various rental taxes on the house, so the property fee is stipulated in the house lease agreement to be paid directly by the renter to the property company.

3. Separate house rent from garage rent. The rent is calculated separately, and its applicable tax fee is relatively small. The garage rental agreement can be made separately as a separate annex.

Lease accounting

For a lessee to obtain an asset as a financial lease and earn an accounting treatment, it must meet the following requirements:

(1) When the lease term expires, the ownership belongs to the lessee

(2) The lease includes the buyer's preferential right to purchase assets at a favorable price

(3) The lease term is more than 75% of the estimated economic life of the asset

(4) At the beginning of the lease, the present value of the minimum lease payment accounts for more than 90% of the fair value of the leased production.