Here are a couple of points for you to think about that I picked up doing some r

Question

Here are a couple of points for you to think about that I picked up doing some research on leasing vs. loans:

1 - Banks prefer leasing companies to finance equipment so they can finance the leasing companies. That way banks get the leasing company's expertise, selling power, processing capability and recourse guarantees. They prefer to buy paper in blocks of in millions instead of thousands. Therefore, banks do not make it easy or attractive for individuals or companies to get individual equipment loans.

2 - Common sense is: If it appreciates, buy it. - If it depreciates, lease it.

What are your thoughts? Agree or disagree? Why?

Explanation / Answer

Hi there,

1) Well, banks do that because there are a lot of benefits in leasing as compared to a loan

2) The only time ownership of an asset makes profit is when that asset appreciates in value - like real estate, patent rights, precious metals or collectibles. If it is going to appreciate, it makes sense to own it. If it is going to depreciate, then selling only the use of the equipment is the most effective way for the time the asset is useful.

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