What is the primary purpose of financing leases?

The primary purpose of financing leases is to allow the use of assets without the responsibilities that come with ownership. In a financing lease, the lessee obtains the right to use an asset for a specified period while making regular lease payments. This arrangement provides businesses with access to necessary equipment or property without the initial capital outlay required for purchase.

Leasing offers flexibility and can support cash flow management since the lessee can conserve capital and avoid the risks associated with ownership, such as depreciation and maintenance responsibilities. This is particularly beneficial in industries where technology and equipment can quickly become obsolete.

While acquiring ownership of assets is a potential outcome of some leases, it is not the fundamental purpose, as many financing leases are structured to remain as operating leases, which do not confer ownership. The ability to facilitate asset resale is more aligned with different financial strategies rather than the core intent of financing leases. Additionally, eliminating project spending is not relevant, as leasing usually involves regular payments and does not fundamentally change expenditure patterns, rather it can be a cost-effective alternative to purchasing assets outright.