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What Is A 'Lease'?

A Lease is a form of value where you acquire an asset and then allow another person to use it for a specific period of time in exchange for a fee.

Leasing benefits the purchaser by allowing them to use an asset without paying the higher price to acquire it.

Josh Kaufman Explains 'Leases'

A Lease involves the acquisition of an asset, followed by allowing another person to use that asset for a predefined amount of time in exchange for a fee.

The asset can be pretty much anything: cars, boats, houses, DVDs. As long as an asset is durable enough to survive rental to another person and return ready for reuse, you can lease it.

In order to provide value via a lease, you must:

1. Acquire an asset people want to use.
2. Lease the asset to a paying customer on favorable terms.
3. Protect yourself from unexpected or adverse events, including the loss or damage of the leased asset.

Leasing benefits the customer by allowing the use of an asset for less than the outright purchase price.

You may not be able to afford to spend tens of thousands of dollars to purchase a luxury car or a speedboat, but for a few hundred dollars a month, you can certainly lease or rent one.

The same principle applies to housing: leasing makes it possible to live in an expensive building for much less than it would cost to purchase or build it yourself. After your lease is up, the asset can be leased by the owner to someone else.

To successfully provide value via leases, you must ensure that the revenue from the lease covers the purchase price of the asset before it wears out or is lost. Most assets have a limited useful life, so you must charge enough to bring in more revenue than the purchase price before the asset loses its value.

In addition, be sure to plan for repair and replacement costs to ensure you’re charging enough money to cover you in the event your asset is lost or damaged in use.

Questions About 'Leases'

• Does delivering value via a lease make sense for your business idea?
• If so, what do you need to plan for to make it successful?

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"The human species, according to the best theory I can form of it, is composed of two distinct races: the men who borrow and the men who lend."

Charles Lamb, essayist

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