why would a financial lease reduce the risk of the purchased asset becoming obsolete?

CFA Level I FRA
#1

My understanding is that a finance lease is something where the buyer (company) makes payments on capital investments such as machinery or trucks or whatever, and it’s a purchase spread out over many years

I can see that this helps with cashflow and tax issues, but why would someone say that it reduces the risk of being stuck with obsolete stuff?

#2

you have the option to revisit the terms of the lease - whether you want to continue on, or walk away every so often. if at that time - a newer equipment is available - go in for a new lease on the newer equipment.

lots of cars are bought on leases, much the same way.

#3

The lessor handles the obligation of disposing of the asset at the end of its life. You have the option to buy the asset at the end of the lease for residual value.

#4

Or not buy it, if it’s obsolete.

#5

I see where the problem is: i thought that an operating lease lets you walk away but a financial lease doesn’t (since you’re making an upfront commitment to an evitable sale later)

thanks again