Final answer:
The key concept here is that when a lessor is also the manufacturer, they not only own but have also produced the leased equipment. This scenario often leads to increased control over the leasing process and extended benefits such as additional revenue streams and stronger customer relationships. Such arrangements are common in industries like construction and manufacturing equipment.
Step-by-step explanation:
When discussing leasing agreements, particularly in the context of capital assets, a lessor is an entity that grants the lease. If the lessor is a manufacturer, this means that they not only own the asset but also have manufactured it. This scenario typically occurs in equipment financing where the manufacturer leases the equipment directly to the end-user or customer. As a result, the lessor does not just earn profit from the creation and sale of the equipment, but also from the leasing arrangement.
For example, a construction equipment company may manufacture excavators and then lease them to construction firms. This can help customers who need the equipment but may not have the capital to purchase it outright. Such a leasing agreement benefits the lessor-manufacturer in several ways. It provides an additional revenue stream, helps in managing inventory, reduces risks associated with second-hand sales, and strengthens customer relationships.
Overall, when the lessor is the manufacturer, it implies a unique position where they can utilize their manufacturing capabilities to foster direct leasing relationships with users, often enhancing their business model and market reach.