Leasing—A New Concept Of Ownership

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The lease represents a departure from the traditional concept of asset ownership as it involves only its use for a specified time. There is evidence that this use-value concept is gaining acceptance in other areas of the economy as well. This historical piece offers some great insight in the beginnings of this practice, much of which is still relevant today.

The stock market may well have given a dramatic demonstration of its prophetic qualities when it abandoned the asset-value theory of establishing value and adopted the price-time-earnings multiple. The switch to valuing a company by its earnings power rather than by its assets is a good example of the use-value concept in action.

In addition to saving funds for other uses, renters have the additional advantage of the newest equipment or machinery available, which is important in this era of rapid technological advances. Then, too, there is a tax advantage, as rental fees are treated as a cost of doing business.

Leading the rapidly growing equipment-leasing field is Lease Plan International Corporation, which, first offered to the public on Aug. 12, 1959, at $11.50 per share, appears to have a period of substantial growth ahead of it. It is expanding operations in such areas as office machines, computers, electronic equipment, etc. The equipment-leasing industry is believed still in its infancy. Take computer renting, for instance. A brand-new business is being built up around computer-service outfits, relatively new themselves.

For instance, C-E-I-R (Corporation for Economic & Industrial Research) rents time to other companies on the high-speed computers that it, in turn, rents from IBM. Another major part of its business comes from the use of its technical knowledge to help other companies to find answers to their problems in the form of mathematical formulas with the aid of the large high-speed computers. The problems could be anything, ranging from those of outer space to controlling the costs of a toy-making plant.

There are about a score of independent computer-service companies, including C-E-I-R and Statistical Tabulating Corp. A rented IBM 1401 computer from the latter helped a relatively small New York bond dealer, William S. Morris & Co., to beat out the giant Bank of America syndicate in two major State of California bond issues.

Also participating in the computer-service field are the major computer manufacturers themselves. International Business Machines, for instance, which has operated seventeen computer rental offices since 1957, expects to add 52 more in the next five years.

In the private passenger-car leasing field, Ryder System, a major truck-leasing company, is challenging the leadership of "rent-a-car" Hertz by cooperating with the National Insurance group of Columbus, Ohio. Under their joint plan, any individual may lease any car of his choice, and a single monthly payment will cover the cost of leasing, insurance, service, maintenance, taxes, etc.

On its part, the Hertz Corporation believes that its years of greatest growth are still ahead. According to Giles A. Wana-maker, Hertz executive vice president, its potential markets are "virtually unlimited." He said that the expansion possibilities for Hertz were analogous to those of the airlines, which were "well aware that there are many millions of people who have never flown in a plane." Mr. Wanamaker said that Hertz was directing its sales campaign at the many millions who have never rented a car and was striving to convert more companies to full-service truck leasing.

These experts were right...leasing has become a huge part of the economy, especially in big ticket and luxury goods. As the industry evolves, watch for new opportunities for investment in the leasing industry.

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