Lease Comparisons

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Lease Criteria Capital Lease Operating Lease
Ownership: Ownership of the asset might be transferred   to the lessee at the end of the lease term. Ownership is retained by the lessor during and after the lease term.
Bargain Purchase Option: The lease contains a bargain purchase option to buy the equipment at less than fair market value. The lease cannot contain a bargain purchase option.
Term: The lease term equals or exceeds 75% of the asset's estimated useful life. The lease term is less than 75 percent of the estimated economic life of the equipment.
Present Value: The present value of the lease payments equals or exceeds 90% of the total original cost of the equipment. The present value of lease payments is less than 90 percent of the equipment's fair market value.
Risks and Benefits: Transferred to lessee. Lessee pays maintenance, insurance and taxes. Right to use only. Risk and benefits remain with lessor. Lessee pays maintenance costs.
Accounting: Lease is considered as asset (leased asset) and liability (lease payments). Payments are shown in Balance sheet. No risk of ownership. Payments are considered as operating expenses and shown in Profit and Loss statement.
Tax: Lessee is considered to be the owner of the equipment and therefore claims depreciation expense and interest expense. Lessee is considered to be renting the equipment and therefore the lease payment is considered to be a rental expense.
What options do I have to finance attachments?
Adding attachments doesn’t have to add to your financial load.
Download the PDF for more information
Download PDF
What options do I have to finance attachments?
Adding attachments doesn’t have to add to your financial load.
Download the PDF for more information
Download PDF
 
* Ag-Power, Inc. does not provide financial advice. Please visit with your personal accountant to discuss the specifics of your operation.
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