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What is the difference between operating lease and term loan?


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2008-04-04 15:11:42
2008-04-04 15:11:42

The difference between a lease and a loan: A lease -requires no down payment and finances only the value of the equipment expected to be depleted during the lease term. The lessee usually has an option to buy the equipment for its remaining value at the end of the lease. The leased equipment itself is usually all that is needed to secure a lease transaction. A lease requires only a lease payment at the beginning of the first payment period which is usually much lower than the down payment. The end user transfers all risk of obsolescence to the lessors as there is no obligation to own equipment at the end of the lease. When leases are structured as true leases, the end user may claim the entire lease payment as a tax deduction. The equipment write-off is tied to the lease term, which can be shorter than IRS depreciation schedules, resulting in larger tax deductions each year. The deduction is also the same every year, which simplifies budgeting (equipment financed with a conditional sale lease is treated the same as owned equipment.) Leased assets are expensed when the lease is an operating lease. Such assets do not appear on the balance sheet, which can improve financial ratios. More of the cash flow, especially the option to purchase the equipment, occurs later in the lease term when inflation makes dollars cheaper. A loan - A loan requires the end user to invest a down payment in the equipment. The loan finances the remaining amount. A loan usually requires the borrower to pledge other assets for collateral. A loan usually requires two expenditures during the first payment period; a down payment at the beginning and a loan payment at the end. The end user bears all the risk of equipment devaluation because of new technology. End users may claim a tax deduction for a portion of the loan payment as interest and for depreciation, which is tied to IRS depreciation schedules. Financial Accounting Standards require owned equipment to appear as an asset with a corresponding liability on the balance sheet. A larger portion of the financial obligation is paid in today's more expensive dollars. Information from


Related Questions

Lease:Where you pay rentals to use an asset (in operating lease where you do not own theasset but only hire it, for example hire purchases)Where you pay lease payments with interest (in finance lease where you do own theasset, for example your house on mortgage)Loan:Where you borrowed an asset(mostly cash) and you payback with interest over the timeperiod of the loan.

Lease financing is like taking a loan to pay for the rental of the product for a fixed term. At the end of the lease term, the product is taken back by the lessor. Debt financing is like taking a loan to pay for an item that will eventually be your own.

What is the difference between bank loan and bank credit?

A mortgage is a loan used to purchase real property.A lease is an agreement signed by an owner and a tenant that allows the tenant to use real property for a fixed period and a fixed amount of monthly rent: residential and commercial.

A scholarship is a gift, which does not have to be paid back. A loan does.

loan is money borrowed and debt is money owed. :-)

Usually buying a car outright is a better deal if you can pay upfront without a loan. If you do need a loan, then depending on the deal you get for the loan vs. the lease it can be a better deal to lease, but not usually.

Difference between loan disbursed and loan outstanding; the unpaid remainder that you still owe.

A debt is something you owe someone, a loan is something you borrow

The loans from the US were part of the Lend-Lease Program.

The greater the down payment, the more favorable the terms of the loan/lease.

how do interest rate calculated in a car loan finance by chase bank

There are many differences between a refinance loan and a home equity loan. These include differences in costs, loan structure, interest rates and accessing your money.

A term loan provides financing for capital costs for example vehicle or equipment needs or fixed assets which are regularly amortized during a period of time. A credit line enables you to definitely easily access funds if you need them for brief-term financing needs. Along with a lease will help you with vehicle and equipment financing, with potential tax benefits.

A line of credit enables you to easily access funds on times you need them for short-term financing requirements. A business loanoffers financing for capital expenses (consisting of equipment or vehicle requirements or fixed assets) which are regularly amortized over a time frame. And a lease helps you with equipment and vehicle financing, with potential tax benefits.

The main difference between loan syndication and consortium finance is that syndication is done based on common terms between the lender and borrower. Consortium finance has to be arranged by the borrower, such as when one bank cannot accommodate the entire loan amount.

loans payable apear under liability on the balance sheet.

The difference between a home equity loan and a line of credit is that a home equity loan is money that is borrowed against the equitable value of a home, whereas a line of credit is a loan that can used for anything and is not borrowed against the value of a home.

From what I can tell, the difference between a one hour payday loan and a regular payday loan is time. With the latter the quickkest turn around is twenty-four hours, where as the one hour option is quicker, assuming that the loan was sought out during the day.

The difference between a mortgage and a home equity loan is that with a mortgage you're just being "loaned" the money and will be paying it back over a period of them and with a home equity loan you can withdraw funds on a needed basis.

An unsubsidized loan has a higher interest rate than a subsidized loan and interest begins to accrue immediately.

The main difference is that only a business can receive a commercial loan, and only an individual can receive a personal loan. Also, a commercial loan can only be used for business purposes, while a personal loan can be used for anything.

Loan origination date is the date that the loan was started. It may also be called "closed date". The difference between the loan origination date and the loan maturity date is the term of the loan.

With a demand loan, the lender can ask for the money back at any time. With a term loan, the borrower has a set term to repay the money.

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