Five things are taken into consideration when determining the amount of rent:
1. The value of the equipment today and what it will be worth at the end of the lease.
2. The likelihood the lessee may stop paying the rent.
1. The value of the equipment today and what it will be worth at the end of the lease.
2. The likelihood the lessee may stop paying the rent.
3. The value of being able to take depreciation on the equipment.
4. The cost to the lessor of borrowing the money to buy the equipment.
5. The amount the lessor needs to charge, and keep in reserve, to cover the risk of getting the preceding four estimates wrong.
4. The cost to the lessor of borrowing the money to buy the equipment.
5. The amount the lessor needs to charge, and keep in reserve, to cover the risk of getting the preceding four estimates wrong.
Four distinct advantages make a lease attractive to a lessor:
1. Regular cash flow from the rent payments.
2. The prospect of making a profit on selling the equipment when the lease is over.
3. Tax benefits of depreciation on the equipment.
4. Ability to further enhance the value of a lease with a creative financial structuring.
1. Regular cash flow from the rent payments.
2. The prospect of making a profit on selling the equipment when the lease is over.
3. Tax benefits of depreciation on the equipment.
4. Ability to further enhance the value of a lease with a creative financial structuring.