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What are the Implications of buying owing versus leasing an asset?
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What is leasing objective?
What leasing does: A leasing company (the lessor) buys the asset (could be a property or equipment or vehicle or computer hardware) which its customer (the lessee) requires it. The customer hires the asset from the leasing company by paying a deposit plus recurring lease rentals over a specified lease term, for use of the asset.In a finance lease, rental covers virtually all of the costs of the asset; lessor claims deduction for tax depreciation whilst the lessee could claim deduction of all the lease rentals in his taxable income, even as substantially all risks and reward incidental to ownership in the asset gets transferred to the lessee though title may not be transferred.In an operating lease, lease doesn't run for the full life of the asset (usually equipment like aircraft or vehicles), lessee wouldn't be liable for the full cost of the value, lessor or the original manufacturer will assume residual riskThe leasing objective is a way of financing to use an asset by the lessee (the end-user) without actually having to buying the asset outright. Though buying is a good option if business has got funds or it is essential to own the equipment, but it is not always the best option because buying results upfront outflow of cash.Instead of buying, leasing of equipment/asset for the business of the end-user allows such an entity (lessee) to use an asset over a fixed period by spreading the cash outflows over a longer period, in return of making regular lease rental payments.In both types of leases, the lessee (hirer) ends up paying much more than paying upfront as for purchasing such an asset, because the lease payments include interest cost element plus principal on the capital employed by the leasing company (the lessor).
Can a leasing company consider it a repossession if you turn a leased car in early?
Yes when a leasing company regains control of an asset it is still considered a Repossession repossession is much easier in a lease agreement than it is in a finance agreement due to the fact that the asset is owned by the leasing company, in a finance agreement you control ownership and the bank only holds security in the asset.
What is leasing company and what is problems of leasing company in India?
A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset.[
Leasing can have a significance effect on the appearance of the firms financial statement such as return on asset.?
Yes, it can have a significant effect. It is part of capital budgeting which looks at the cost of leasing versus the cost of buying a new asset. In example, when leasing machinery, you enter into a contract, but you are generally not expected to pay for maintenance costs etc. Also, you do not take over ownership of the asset, so if you require it for only a short period of time it may actually be easier to get rid of. Furthermore, the lease repayments are tax deductible items, so by the end of the lease the entire cost of the lease has been deducted. When purchasing an asset you need to take into account the installation cost, salvage value etc. You can calculate the depreciation of the asset and there are varying ways of reducing depreciation, such as straight line depreciation (a percentage of the prime cost = original purchase cost) or diminishing value (generally a percentage per period). The depreciation will have a tax benefit attached to it, and the advantage of purchasing is ownership of the asset. You can make a gain (or a loss) when disposing of the asset by the end of its life. When performing calculations for both purchasing and leasing options, it can be determined what would be the most cost effective way. You will calculate the Net Present Value of both items for the total costs and income streams over the entire life of the asset.
What is leasing in a business?
Wikipedia: A lease is a contract calling for the lessee (user) to pay the lessor (owner) for use of an asset.
How are operating leases different from capital leases?
Operating lease does not give the ownership of the asset to lessee while finance lease gives the ownership of the asset as well at the end of leasing period.
Why companies go for leasing rather than purchasing agreement?
Companies prefer a leasing agreement because they can keep the asset in the long run. A purchase agreement doesn't allow the business to continue making money.
How important are specialized asset leasing businesses to the success of innovative arrangements like a sale and leaseback?
The sale-and-leaseback lease is a form of asset financing, which allows a business to sell an asset they already own to a leasing company and then lease the asset back. A specialized asset leasing business is purchasing the asset at the lesser price of the fair market value, or the current book value. This form of lease allows for an immediate increase in the selling companies cash flow and working capital while providing immediate access to the asset. By agreeing to purchase the asset back, through regular lease payments, the company maintains their credit options and maximizes financial leverage. Additionally, they are not faced with a lump sum payment for the asset. The leasing company is performing an asset financing service, and benefits in the interest rates charged for the lease. This option works well for companies that do not want to continue to own an asset but require the use of the asset throughout its useful life. khfrench - University of Phoenix - MGT/325 October 24, 2005 reference: The Motey Fool Fool.co.uk (2005). Asset/Lease Financing retrieved from http://fool.xbridge.com/ Sale and leaseback arrangements have been around for 2000 years so not much innovative about that. As for "Asset leasing businesses" for the most part this is a simple form document used by the businesses seller/leasebacker. These types of transactions do not require ellaborate outside assistance as the end result is often a transfer of remaining assets when the buyer has a "business interuption". In other words, the document simply states the list of assets, the financial terms, and the consequences for failure to pay. No need for outside services to perform routine business activities.
When is a capital lease a better alternative than buying an asset?
When the asset depreciates (loses value) fast and you want it only for a short period of time it may be better to lease than to buy. Leasing may also be a less expensive or more available method of financing than borrowing, particularly for someone with poor credit or little credit history, if you cannot afford to pay cash.
What Is Equipment Leasing?
Basically, an equipment lease is a rental agreement in which one party maintains possession of an asset and another party uses it in its business functions.
What is the difference between asset market and space market in commercial real estate?
Space market is for leases and asset markets are for buying and selling
What is meant by operating lease?
Operating Lease is a lease other than finance lease. A leasing transaction wherein the lessor takes the asset risk and the credit risk.
