Lease Financing – A Perfect Addition to Your Portfolio

What is Lease Financing?

Looking to earn consistent returns without riding the stock market rollercoaster? Lease financing could be your answer. It's a smart and stable investment avenue that lets retail investors tap into income-generating assets—without owning them outright.

In this blog, we’ll explain what lease financing is, why it’s gaining traction among modern investors, the different types available, and how Tap Invest can help you invest in leasing with up to 18% IRR.

Lease financing is an investment method where businesses lease high-value assets—like vehicles, equipment, or infrastructure—instead of purchasing them upfront. You, the investor, become the lessor, funding the asset. The lessee (business) pays you regular rentals for using the asset over a fixed term.

You maintain ownership of the asset while earning steady monthly income. At the end of the lease, the asset can be sold, returned, or renewed—unlocking additional value.

Think of it as owning the car, but someone else pays you to drive it.

Why Retail Investors Should Consider Lease Financing

Lease financing offers unique advantages not found in traditional investments like equities or fixed deposits. Here’s why it’s worth exploring:

Consistent Cash Flow

Regular lease payments provide stable, predictable income—ideal for meeting monthly financial goals or building passive income.

Asset-Backed Security

Each investment is backed by a tangible asset—vehicles, machinery, etc.—which reduces default risk and adds collateral value.

Tax Efficiency

Investors may benefit from depreciation and other tax deductions on leased assets, improving post-tax returns.

Portfolio Diversification

Lease financing lets you diversify across multiple industries (logistics, healthcare, retail, etc.), reducing reliance on market-linked instruments.

Low Market Correlation

Because it isn’t tied to stock or bond performance, lease financing helps stabilize your overall portfolio—especially during volatility.

Types of Lease Financing

Understanding lease structures helps you choose the right investment for your risk-return profile.

1. Operating Lease

• Short to mid-term

• Lessee rents the asset without ownership transfer

• Lessor retains ownership and risk

• Common in fleet leasing, equipment, and electronics

2. Finance Lease (Capital Lease)

• Long-term and structured like ownership

• Lessee bears maintenance, risk, and usually gets a buyout option

• Shown as an asset/liability on the lessee’s balance sheet

3. Sale and Leaseback

• A company sells an asset (e.g., equipment) to an investor and leases it back

• Frees up capital for the company and gives the investor an income-generating asset

4. Sublease

• The original lessee leases out the asset to a third party

• Rare in retail investment setups, but used in real estate and co-leasing

Key Features of Lease Financing

Here are the top features that make lease financing a strong contender for your portfolio:

• Predictable Income: Monthly lease payments ensure consistent inflows.

• Collateral-Backed: Assets serve as a security cushion.

• Custom Tenures: Lease terms can be 1–5 years, offering flexibility.

• Multiple Use Cases: From electric vehicles to medical equipment, the asset pool is diverse.

• Tax Advantages: Depreciation and GST inputs may offer net tax savings.

• Low Volatility: Your investment isn’t influenced by stock market swings.

Explore our Asset Leasing products designed for retail investors looking to earn up to 18% IRR.

Frequently Asked Questions (FAQs)

1. What is lease financing in simple terms?

It’s a model where you buy an asset and lease it to a business for regular rental income—without selling it to them.

2. How much return can I expect from lease financing?

Returns vary from 10–18% IRR, depending on the asset, lease tenure, and lessee profile.

3. Is lease financing safe for retail investors?

Yes, when done through vetted platforms like Tap Invest. Assets are secured and often insured, and lessee credit checks are mandatory.

4. Do I have to manage the leased asset?

No. Tap Invest handles sourcing, leasing, servicing, and asset management on your behalf.

5. How is this different from owning stocks or mutual funds?

Unlike equity markets, lease investments offer predictable income, tangible asset backing, and lower volatility.

6. Are there any tax benefits?

Yes, you may claim depreciation or offset capital gains, depending on the structure. We recommend consulting a tax advisor for personalized advice.