Accounting 311 Cost
Matthew Ponzurick
Accounting 305-001
Spring 2013
Chapter 21 Summary
Leasing Environment Many companies these days choose to lease buildings or certain structures rather than owning them because there is more money involved in leasing a property. In 2010 521 billion dollars were made through leasing properties. The question to answer is what type of equipment may be leased, and the answer is any type of equipment is allowed to be leased. For example; railcars, helicopters, bulldozers, barges, CT scanners, computers, and the list goes on and on.
Three types of Lessors There are three main types of lessors and they are banks, captive leasing companies, and independents. Banks are generally the biggest players in the leasing business. They have low funds which allow them to purchase assets at a lesser cost than their competition and they are more aggressive in the leasing markets. Banks also have a big advantage because now transactions are more standardized which gives banks an advantage because they do not have to innovate in structuring lease arrangements. Captive Leasing Companies are subsidiaries whose primary business is to perform leasing operations for the parent company. Companies such as CMS corps, Ford, and IBM are all companies that facilitate the sale of products to consumers. These types of companies have a point-of-sale advantage in finding leasing customers. The current trend for these types of companies is to focus more on their companies’ products rather than lease financing. Independents are the final category of lessors. Over the past few years independents have not done well in the market. Their shares have dropped more dramatically as banks, and leasing companies have taken over the market being more aggressive in the past couple of years. They are often good at developing innovative contracts for lessees. In addition they are starting to act as captive finance companies for some companies that do not have leasing subsidiary.
Accounting 305-001
Spring 2013
Chapter 21 Summary
Leasing Environment Many companies these days choose to lease buildings or certain structures rather than owning them because there is more money involved in leasing a property. In 2010 521 billion dollars were made through leasing properties. The question to answer is what type of equipment may be leased, and the answer is any type of equipment is allowed to be leased. For example; railcars, helicopters, bulldozers, barges, CT scanners, computers, and the list goes on and on.
Three types of Lessors There are three main types of lessors and they are banks, captive leasing companies, and independents. Banks are generally the biggest players in the leasing business. They have low funds which allow them to purchase assets at a lesser cost than their competition and they are more aggressive in the leasing markets. Banks also have a big advantage because now transactions are more standardized which gives banks an advantage because they do not have to innovate in structuring lease arrangements. Captive Leasing Companies are subsidiaries whose primary business is to perform leasing operations for the parent company. Companies such as CMS corps, Ford, and IBM are all companies that facilitate the sale of products to consumers. These types of companies have a point-of-sale advantage in finding leasing customers. The current trend for these types of companies is to focus more on their companies’ products rather than lease financing. Independents are the final category of lessors. Over the past few years independents have not done well in the market. Their shares have dropped more dramatically as banks, and leasing companies have taken over the market being more aggressive in the past couple of years. They are often good at developing innovative contracts for lessees. In addition they are starting to act as captive finance companies for some companies that do not have leasing subsidiary.