Leasing Vs Buying

1. Leasing Vs Buying By : Teryn Mills 2nd period 1-15-2014

2. Buying Definition • obtain in exchange for payment. • pay someone to give up an ownership, interest, or share. • procure the loyalty and support of (someone) by bribery. • be a means of obtaining (something) through exchange or payment. • get by sacrifice or great effort • make a profession of purchasing goods for a store or firm.

3. Defintion Leasing • a contract renting land, buildings, etc., to another; a contract or instrument conveying property to another for a specified period or for a period determinable at the will of either lessor or lessee in consideration of rent or other compensation. • the property leased.

4. Advantages Buying •Established Track Record – When you buy a franchise, you are purchasing an already time-tested, well-honed, proven concept with a business model that works. •Faster Start Up – The learning curve is never so short as when you open a franchise. You have your franchisor’s experience to draw upon, and a vast majority of your initial decisions are already made. No need to wonder what color to paint the walls, or which retail products are worth stocking, or which classes will draw in the crowds, or how best to phrase your company’s publicity literature. You receive on-site and ongoing training in every aspect of the business. •Low Investment – Most franchies keep their initial investment demands low, which favors new entrepreneurs. A franchise benefits by having operations in an ever-widening geographic distribution. In order for the franchise to grow, start-up costs are kept to a minimum. •Purchasing Power – Furthermore, by being part of a group of franchisees, the company as a whole will enjoy stronger purchasing power and more favorable discounts from suppliers and wholesalers. There’s strength in numbers, and you as franchisee will be the prime beneficiary. •A Proven Business Strategy – While many new businesses struggle to develop a viable and profitable business plan, franchisors have already done the heavy lifting. The lifeblood of a successful franchise is completely centered on their confidence that you, the franchisee, will succeed. Their success is in every way tethered to your success. •Name Recognition – It takes years to build up name recognition for a new business when you first introduce your brand into the marketplace. A franchise, on the other hand, can provide you with instant awareness. Furthermore, even if the franchise is new to your particular territory, as the franchise continues to expand both nationwide and in your geographic area, brand awareness will increase exponentially in a way that it never could if you were simply running your own single storefront. • Pre-Established Supply Lines – Establishing dependable relationships with vendors, service providers and suppliers is one of the biggest challenges for new businesses and can compromise any enterprise. With a franchise, you benefit from relationships that are already well-established and thoroughly vetted.

5. Advantages Leasing • Obsolescence: Another advantage to leasing is working around obsolescence, which means the company anticipates frequently replacing the fixed asset. • Flexibility: Asset flexibility is another leasing advantage. Based on the relationship between the lessor and the lessee, the lease may be for either just a few months or the entire expected life of the asset • Lower-cost financing: Based on many different variables, a company may be able to utilize tax benefits associated with leasing • Tax advantages: Separate from any tax benefit a company may gain, lease payments can reduce taxable income in a more appropriate manner than depreciation expense. • Off-balance-sheet financing: Finally, operating leases provide off-the-books (or balance sheet) financing. In other words, the company’s obligation to pay the lease, which is a liability, doesn’t reflect on the balance sheet.

6. Disadvantages Buying • Buying a franchise means entering into a formal agreement with your franchisor. Franchise agreements dictate how you run the business, so there may be little room for creativity. • There are usually restrictions on where you operate, the products you sell and the suppliers you use. • Bad performances by other franchisees may affect your franchise's reputation. • Buying a franchise means ongoing sharing of profit with the franchisor. • Franchisors do not have to renew an agreement at the end of the franchise term.

7. Disadvantage Of leasing • Overall cost. The biggest disadvantage of leasing is that your costs over the life of the asset are generally going to be higher than if you purchased the asset. This is because your rental payments must compensate the lessor not only for acquisition and financing costs, but also for the lessor's retained risk of continuing ownership. Performing a thorough cash analysis is useful in estimating the actual cost differential between leasing and purchasing. • No ownership interest. Your lease payments generally do not establish any equity in your leased equipment. In other words, at the end of the lease you won't have a tangible asset to show for your payments. This can be especially painful if you've grossly underestimated what the equipment would be worth at the end of the lease. Negotiating a purchase option under which a portion of your lease payments are credited to the purchase price is one way to effectively create equity in leased property. • Lost tax benefits. Assuming that the IRS doesn't recharacterize your lease as a purchase for tax purposes, a potential disadvantage of leasing is losing the tax benefits of depreciation deductions that come with ownership. This disadvantage may be insignificant, however, if the "lost" benefits are offset by your ability to deduct your rental payments or if you have insufficient income or tax liability to be offset by the lost deductions and credits. • Commitment to property. Once you sign a lease agreement, you're generally committed to making payments for the entire lease period even if you stop using the property. Most equipment leases are either non-cancelable or impose a stiff penalty for early termination.

8. Leasing a House Advantage • Smaller Financial Investment • Minimal Repairs and Maintenance • More Flexibility. • No Loss of Equity or Property Value

9. Buying a House Advantage • Greater privacy. • Homes typically increase in value. • Your costs are predictable and more stable than renting because they’re ideally based on a fixed-rate mortgage. • The interest and property tax portion of your mortgage payment is a tax deduction. • There’s pride in homeownership, which also closely ties you to your community.

10. Leasing A Car Advantage • Lower Monthly Payments • No Down Payment • More Car, More Often • Fewer Maintenance Headaches • Lower Up-front Cash Outlay • Lower Tax Bite • No Used-Car Hassles • GAP Coverage Included

11. Buying a car Advantage • Eventual ownership, freeing you from the pain of payments. • After the vehicle is paid off, you're free to sell it at any time. • You can drive at will, never having to worry about mileage limits. • No worries over minor mishaps like spilled coffee stains on carpeting or a dog-chewed seat belt. • You're free to modify and/or accessorize. • Insurance costs are generally lower than leased vehicles.

12. Source • http://www.dummies.com/how-to/content/the-advantages-of-leasing.html • http://usnews.rankingsandreviews.com/cars-trucks/Buying_vs_Leasing/ • http://www.leaseguide.com/lease04.htm