Lease-Buy Analysis

[@jasonjackson4555]

You just made me look like a genius at work. I followed your guide and built a lease vs. purchase template for our new office computers. Our VP of Finance likes mine better than the one he made. Thanks a lot!

[@abreele2000]

Absolute best video on Lease/buy out there... So easy to follow along... concepts went from mud to crystal clear in less than 30 minutes. THX a ton.

[@MissNickkieJ]

I want to thank you so very much for this clear explanation of a topic covered on my exam for tomorrow. I am understanding the topic of Leases much more thanks to this video! All power to you.

[@gbmacbook4364]

This is one of the greatest videos on YT. Thank you very much professor.

[@gbmacbook4364]

It is a shame that 44K people watched this and only 241 thumbs up. People are worthless.

[@projsanti]

The most important advantage of Capital lease is, it makes the project possible in the economies where raising capital is difficult which otherwise may never be realized if the equipment has to be bought with heavy capital upfront. Thank you for video. It is enriching..

[@stefaniadilascio4651]

thank you so much professor better than PWC IFRS simulation calculator of the discounted cash flow, this is such a great tool for a Decision making perspective

[@l.huyenman]

Great video and very helpful. Thank you Prof. Pat Obi !

[@henrysilva6479]

What a great video! Thank you so much for your detailed explanation!

[@danielreina8318]

I am doing the canadian CPA and this came in very handy thanks!

[@chinweikeokwuduche]

Nice one bro, keep rolling out more of these quality videos. Thanks.

[@rajpadhiyar7202]

Very nicely explained.

[@GizawOtoo-Annan]

What if the equipment was purchased in USD buy the lessor is leasing the equipment in a country where currency is different example Ghana Cedis. How to you account for the depreciation of the Ghana Cedis to the USD in the leasing financing model?

[@mauriciomorenoaguinaga856]

Hi Professor. Thanks for the video! I have some questions: 1. Let's suppose that I (as the lessee) exercise the buyout option in year 4. So I need to include the payment of 450,000 usd in year 4. Can I apply a tax effect of 450,000*T on this?. 2. Can you depreciate equipment that has been previously depreciated by another organization? Let´s say that I can depreciate a computer in 4 years. But the lease term is 3 years, so the lessor depreciated the computer for 3 years. Can the lessee, who bought the computer in year 3, would be able to benefit from the depreciation in year 4 ? Thanks in advance!

[@PatObi]

If lessee later buys out the equipment, there is no tax implication (except for sales tax where that applies). Tax is only paid when you later SELL the asset, and it's paid on the amount above book value. If you buy any asset, used or new, you can certainly depreciate it. Depreciation simply means you're spreading the cost of the asset over several years for tax write-off rather than take the entire write-off at the time of purchase. Hope this helps :-)

[@finmatrixparadigm7904]

Very useful

[@hbmyers1136]

Great video, very helpful. Any chance you would post one that reflects a Capital Lease from both the Lessee and Lessor perspective?

[@mohamedeltayeb2489]

Thanks Prof’, a small one here, is there a cases of maintenance fees at Year Zero, I thought by Year zero is the investment year where no expenses at all.

[@benjaminrice5510]

how did you find the lease payment? How did you find the salvage value?

[@janespain836]

Thank you for this excellent explanation. Will you provide me with the Spreadsheet link? Many thanks, Jane

[@PatObi]

Thanks Jane, for your comment. Because variants of the spreadsheet are used in my assessments, I'm unable to make it available. The intent though is for students to build their own by watching the video. Hope that helps!

[@johnhall5213]

Hi Prof - Great video! I'm not following the 5 payments where n=4. I get it's an annuity due. Is it not 600K = Mo 1-12; 600k = Mo 13-24; 600k = Mo 25-36; 600k = Mo 37-48? Are you saying there's actually an additional 600k = Mo 0-? where the payment really covers no specific period of time? I'm trying to convert your model to a monthly stream and getting hung up on the period vs payment conversion. $3M / 49 = $61,224. t-0 = 61,224 t-1-48 = 61,224. Is this correct?

[@PatObi]

Hi John, this is a hybrid annuity. You can view it as an ordinary annuity but one that requires a "down payment" of the same amount at the beginning of the contract.

[@jimbanta3815]

Can you provide a link to the actual Spreadsheet please :)

[@PatObi]

I'm so sorry, I can't :-) Variants of the spreadsheet are used in my assessments. The intent is for students to build their own by watching the video.

[@tonycolmenares7708]

The only part I don't understand is the tax effect on the Lease Option. Is there a tax deduction for leasing equipment?

[@PatObi]

Tax savings are applied on lease payments

[@bongliukshin60]

Dear Prof, would you provide the link to the actual Spreadsheet? Thanks

[@SalK-3S3K]

Why interest is included in Buy decision? Is it not double counted when c/f are discounted, i.e. interest is deducted+discount rate is applied.?

[@PatObi]

No. That application - of excluding interest payment - is only in Cash Flow Estimation, not in a financing decision analysis.

[@2aYK]

Isn't it after-tax cost of capital used to calculate the loan instalment? May be I am missing the lease condition. Would appreciate if clarified.

[@PatObi]

After-tax cost of capital is used only for the lessor's analysis because it's an investment decision. Lessee's though is a financing decision.

[@Samu-gz3qj]

I am not able to download the sheet

[@abbybaby1903]

Hi, this spreadsheet is very helpful. is it possible for you to mail me the spreadsheet?

[@ivajlonaumov6499]

Can you send me this spreadsheet please

[@smagaczsolutions3165]

Would you be willing to share this template PLEASE?

[@PatObi]

Yes

[@batkhuuariunbold6565]

how to download this excel file

[@omarcervantes8056]

where can i download the file?

[@peteescobedo6832]

Did you find it ?