Respond to the following in a minimum of 175 words PLEASE TYPE RESPONSE:
Why would you rather lease than own?
There are five advantages these are: 1. Leasing reduces the upfront cash needed to use an asset.
2. Lease payments often are lower than installment payments.
3. Leasing offers flexibility and a lower cost when disposing of the asset.
4. Leasing might offer protection against the risk of declining asset values.
5. Leasing might offer tax advantages.
Can you provide more specific example of each of the five?
Lease is long term arrangement between parties where one party rents the asset to the other party.
1. Leasing reduces the upfront cash needed to use an asset
For example: If the cost of assets is $200,000 lease can reduce the cost based on number of years of lease and implied rate of interest in it. Lease usually requires minimal annual payouts compared to owning an asset by upfront cash payment. It saves cash to the company which is useful during uncertain times.
2. Lease payments often are lower than instalment payments
Lease payments are long term in nature and are usually lower payments compared to instalment. For example: Instalments are Equated monthly instalments (EMI) which includes principal and interest payments. Lease is often annual payouts without explicit interest rates.
3. Leasing offers flexibility and a lower cost when disposing of the asset
For example: Lease assets can be given back to the Lessor or can be purchased at the end of lease period depending on contract for bargain purchase price whereas owned assets has no such option while disposing off.
4. Leasing might offer protection against the risk of declining asset values
For example: Leasing does not transfer the ownership of asset to the lessee hence lessee has protection again risk of declining asset value compared to owning an asset
5. Leasing might offer tax advantages:
For example: Lease payments are tax deductible for income tax purpose. It can be claimed as expense in income tax return. So there is tax shield on lease payments. For example if annual lease payout is $100,000 and tax rate is 30% there is tax savings of $30,000 on lease payments to the firm.
Respond to the following in a minimum of 175 words PLEASE TYPE RESPONSE: Why would you...
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