Simply put, it can be understood as the income that can be obtained in other uses after a certain resource is put into one use.
We often compare financial leasing with loans. Who has higher financing cost? If the opportunity cost is not added, incorrect conclusions may be drawn. For example, people usually think that the financing cost of financial leasing is higher than that of bank loans. The main reason for this misunderstanding is that the opportunity cost is not considered.
First of all, from the interest rate point of view, the leasing company's funds come from banks, so the financing cost must be higher than that of banks. But opportunity cost is not necessarily considered. Bank loans are based on capital occupation. You can work out the cost as much as you put in. Financial leasing is based on the subject matter of the leased property to calculate the cost. Some manufacturers rent under the slogan of "zero" interest rate, which is actually a means of promotion. There is no such thing as a free banquet, and the interest has been included in the sales price in advance from the date of purchase.
For the above reasons, it doesn't make much sense to talk about interest rates with leasing companies. There may be interest rate problems in the accounting treatment of financial leasing, but it is not the interest rate given by the leasing company, but the rate of return of the leasing company. Used for financial processing, it can't truly reflect the financing cost.
The second concept is that the interest rate of banks is higher than that of leasing companies. Because the bank's interest rate cannot rise or fall at will, there are policy restrictions. The interest rate of the leasing company can be determined according to the bargaining of both parties, which is supported by policies. But now the bank's policy has begun to change, in fact, the loan interest rate is not capped. For enterprises with poor credit, the interest rate of bank loans will not be low. Financial leasing is also the second best project for banks, because it adds a real right guarantee. There won't be much difference in interest rates, because banks need high interest rates to do such projects.
Third, the operating procedures of financial leasing projects are much more open than bank loans, the bidding procedures are simpler, and the negotiating parties are more equal. There are fewer under-table transactions such as meals and kickbacks, and the trading time is faster. The opportunity cost of using financial leasing is much smaller than that of bank loans if the benefits brought by early production are taken into account.
Fourth, financial leasing has unique tax benefits that cannot be obtained by any financing method. In addition, the approval process is simple, which is also an important reason why financial leasing has become the main financing channel for foreign SMEs.
More than 70% customers of construction machinery and equipment are small and medium-sized enterprises. They do not have the strong strength to engage in public relations in banks, and banks are not interested in microfinance. Therefore, banks stopped financing enterprises in this way after paying off the pain of mortgage loans. Financial leasing also quietly emerged at this time.
In the new economic environment, people should have certain financial knowledge, which is commonly known as "financial quotient" (another kind of wisdom besides IQ). The real meaning of financial leasing should be financial leasing (in English, finance, finance and financing are all one word). In this way, the problem of financing difficulty can be solved and the opportunity cost can be reduced.