Is Leasing Green?

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Koji Intlekofer

Leasing services rather than purchasing products is becoming more and more commonplace in today’s markets and industries. Leasing appeals to businesses because of the flexibility and accounting advantages it offers, and protects businesses from changes such as technical obsolescence. However, recent debate has arisen as to the possible environmental benefits that result from the growing use of leases. With leasing, ownership of a product remains with the lessor, making them responsible for disposal. It is monetarily beneficial for that lessor to remanufacture or refurbish that product at the end of a lease so that is can be leased to additional customers with no significant material or manufacturing costs to the lessor. This also results in a reduction of landfill waste, as fewer products are disposed in favor or refurbishment. Complications exist, however. A third party firm may disrupt the OEM’s material loop, OEM’s may want to premature remove old equipment from the market to make room for newer products, and current US tax regulations require a maximum lease term of only 75% of a product’s expected lifetime. Obviously, the case of leasing being environmentally beneficial is not clear-cut. The goal of this research is to determine, with thorough analysis and case studies, if leasing is truly a greener option.