1
Name 3 items you can lease!
Car, buildings, trucks, machinery, etc
Can the entire lease payment be done in the first lease term? ((YES or NO)
Yes
Leasing means paying rent for a period of time. (TRUE or FALSE)
False
Does the right of ownership immediately transfer to you when you agree to the leasing? (YES or NO)
NOOO
What is leasing?
A lease is a type of financial agreement that authorises individuals or companies to borrow (lease) without needing to buy them.
When does a lessee acquire the right of ownership in a finance lease?
Once the agreement is over, but ONLY if the agreement provides for the transfer of ownership
What is the term for the person who provides leasing?
Lessor
What is the term for a person/customer who leases?
Lessee
Name 2 advantages of leasing!
Mitigating the Impact of Inflation: It protects against inflation because the payment is fixed from the beginning; a change in prices or exchange rates won’t affect this
No Upfront Collateral: There does not need to be a separate collateral; the asset itself is considered the collateral
Payment Flexibility: It is flexible because the contract does not have a fixed duration for borrowing; it can be adjusted to fit both parties
Alternative Financing Source: The lessee does not need to pay a large amount up front; they merely pay the lessor periodically, while the lessor pays the full upfront cost for the asset
Quick and Easy Process: It is faster than getting a bank loan because the paperwork is simpler and shorter
Legal Protection: the contracts are legally binding, and it's clear who provides certainty for all parties involved
Minimised Asset Depreciation Risk: The lessee does not bear full risk if the asset loses its value or becomes outdated because the owner is still owned by the lessor
Bimo LLC, a new contractor without heavy equipment, was hired to build a school. To level the land, they needed a bulldozer but lacked the funds to buy one. They entered into a ____ lease, paying IDR 100,000,000 per month with an option to own the bulldozer at the end of the lease. What type of lease is this?
Finance lease
What is 1 reason businesses usually choose to do leasing?
To obtain expensive assets (like machinery or vehicles) without having to pay the full purchase price upfront
Bimo LLC rented a car and paid IDR 6,000,000 per month for two years. The leasing company kept ownership and handled insurance and major maintenance. At the end, Bimo LLC returned the car with no purchase option. What type of lease is this?
Operating lease
What is the difference between an operating lease and a finance lease!
Finance lease: long-term
Operating lease: short-term
What is the difference between leasing and renting? name 2 differences!
Ownership Option: Renting cannot transfer ownership, while leasing, you can
Term: Leasing is medium-long term, while renting is short-medium term
Payment: Leasing usually has instalment interests, while renting is paid periodically with no interest
What right is being transferred from the lessor to the lessee?
The right to use the asset