Assessment of Leasing

Features favourable for municipalities

Features NOT favourable for municipalities

  • The acquisition costs are not recorded as an investment in accounting, only the leasing rate is recorded as operating expense. This brings advantages and does not increase the indebtedness.

  • It allows a municipality to use energy efficiency, renewable energy, or other state-of-the-art equipment without purchasing it outright.

  • Low level of effort to execute and administer, particularly for smaller scale projects. They are well understood by most finance teams.

  • The straightforward structure of leases means that they do not provide the benefits of some of the more specialized financing options, such as performance guarantees or automatic transferability.

  • Difficulty in assuming the financing risk and the risk of availability of the use in the contractual terms.

  • Usually higher costs compared to self-financing

Types of EE projects or EE services suitable to be financed this way

  • Investments with relatively high up-front cost based on the purchase of equipment, not modernization or renovation

  • Acquisition of movable goods like vehicles, working machines, office equipment that can be returned resp. exchanged after the end of the utilization period. It is possible to keep up to the technical state-of-the-art.

Recommendations for deployment

The choice for leasing depends on many aspects such as:

  • The direct financing costs compared to the lease payments

  • Legal aspects, such as the ownership situation and its implications, conditions for contract cancellation

  • Securities required by the lease provider

  • Tax issues



Examples

In Austria leasing is a standard procedure in purchasing purchase vehicles, working and office equipment.

In Poland this financial instrument can be introduced / further developed following the example of the PolSEFF programme