Graham Peirson ... [et al.] Business Finance. 11th edition. North Ryde, N.S.W. : McGraw-Hill, 2012. ISBN 9780070997592 Chapter 15 pages 488-515

CHAPTER CONTENTS
15.1 Introduction 15.2 Types of lease contracts 15.3 Accounting and taxation treatment of leases 15.4 Setting lease rentals 15.5 Evaluation of finance leases 15.6 Evaluation of operating leases 15.7 Advantages and disadvantages of leasing 15.8 Chattel mortgages and hire-purchase

Graham Peirson ... [et al.] Business Finance. 11th edition. North Ryde, N.S.W. : McGraw-Hill, 2012.

ISBN 9780070997592

Chapter 15 pages 488-515

INTRODUCTION

When most people think of leasing, they probably think of something like hiring a car for the weekend or leasing an apartment for 6 months. While such contracts are indeed leases, there is another form of lease, known as a finance lease, which uses the legal form of leasing in such a way that it becomes an alternative to borrowing funds to purchase new assets. In this chapter, we consider the various forms of leases and explain how a proposed lease may be evaluated. We also consider chattel mortgages and hire­ purchase, which, together with leasing, are known as 'equipment finance'. Leasing is distinguished from most other forms of finance by the fact that the financier (the lessor) is the legal owner of the leased asset. The asset user (the lessee) obtains the right to use the asset in return for periodic payments (lease rentals) to the lessor. In other words, leasing allows a company to obtain the use of an asset, without also obtaining ownership of the asset. The range of assets that can be leased is virtually unlimited. Many motor vehicles, aircraft, computers, photocopiers, machinery and other items of production equipment are leased. Unusual assets to be leased include oil rigs, sewage treatment plants