What does the concept of "leverage" in leasing refer to?

The concept of "leverage" in leasing primarily refers to the practice of borrowing funds to enhance the potential return on investment. In a leasing context, businesses often use leverage to finance assets more efficiently, allowing them to use borrowed capital to acquire equipment or real estate while preserving their own capital for other uses. This borrowing can come in the form of a loan or lease agreement, where the lessee pays for the use of an asset over time rather than purchasing it outright.

By using leverage, companies can potentially gain a higher return on their investment since they are able to invest in more assets than they could if they were only using their own cash resources. This strategic approach to financing can lead to increased operational efficiency and growth opportunities, making the use of leverage a common practice in the leasing industry.