Trucking Company

TRUNKING COMPANY

ACC/541

University of Phoenix

Trucking Company

What is a lease? A lease is a way of attaining an asset for a long period of time; this has become a very popular method of acquiring property or assets due to its flexibility on the budget. Leasing is considered to be very efficient for many reason such as it offering 10 percent financing, offers that protect against obsolescence, it could also be less costly, and last but not lease and very important it does not add debt to the operating budget. These are some of the most important reasons why leasing has become so popular. There are different types of leases that are available to satisfy the type of business and risk a company is willing to take. In the following memo I will discuss the types of leases that are available and a recommendation of which leasing option I feel would be best for the company.

There are three options that are available when acquiring a new asset, there is the option to buy, or to lease, a lease has two types of option that allow flexibility, you could choose between capital lease or a operational lease. The first option is to buy, but when you purchase an asset it carries all of the ownership towards the company so it will reflect your operating budget because you have to account for the cash spend, and then the buyer takes full responsibility over the asset. So even if the truck is bought with a warranty, all maintenance cost or breakdowns will be handled by the buyer. Like buying there is also the option of using a capital lease, a capital lease is very similar to buying and asset. Even though the truck would not be fully yours it transfers all of the risk of ownership to the company, this option also reflects the asset on the companies operating budget. The only difference between a purchase and a capital lease is that the lesser and the lessee could come to written terms over the amount of ownership and the type and amount of risk that would be...