Finance and Lease

What factors should I consider when choosing between finance and lease?

Factors to consider include cash flow, ownership goals, tax implications, asset type and lifespan, and overall financial objectives.

Can I upgrade or modify leased assets?

Leased assets typically have restrictions on modifications or upgrades without lessor’s consent. However, some leases may offer flexibility for upgrades or modifications during the lease term.

What happens at the end of a lease term?

At the end of a lease term, the lessee may have options to return the asset, renew the lease, or purchase the asset at a pre-determined price (buyout).

How does leasing impact financial statements?

Leasing affects financial statements differently based on lease type (operating vs. finance). Finance leases may appear as assets and liabilities on the balance sheet, while operating leases may not.

What types of assets can be leased?

Assets commonly leased include vehicles, equipment, machinery, office space, and even software licenses. Leasing is often used for assets that have a defined useful life.

Finance and Lease are two different methods of acquiring assets, such as vehicles, equipment, or property. Finance is the process of obtaining funds, usually through borrowings or investing; whereas, Lease is an agreement in which the lessor gives the lessee, possession of his assets for a predetermined time period (not for periodic payments), where the responsibility of maintaining the property is with the lessee.