A lease involves buying an asset first, then letting another person use that asset for a predetermined amount of time in exchange for a fee. Two common assets that are leased are apartments and cars. Others include boats, office space, and furniture. As long as an asset can last long enough to be rented to another person and returned ready for reuse, you can lease it.
To operate a successful business that offers a lease, you need to:
- Purchase an asset that people want to use.
- Lease the asset to a paying customer on favorable terms.
- Protect yourself from unfortunate events, such as the damage or loss of the asset.
The customer receives value from a lease by being able to use the asset for less than the total purchase price. You may not be able to spend $60,000 to buy a Porsche, but for $600 a month, you can easily lease one. After your lease is up, the owner can lease the asset to someone else.
Most assets have a limited useful life. As such, to successfully provide value through a lease, you need to charge enough to bring in more revenue than the purchase price before the asset loses its value.
Also, remember to factor in repair and replacement costs when you determine your pricing so that if your asset is damaged or lost while in use, you’ll be able to recover.
To learn more about a lease as a form of value, check out The Personal MBA by Josh Kaufman.
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