Summary of Main Conclusions

Chapter 1 introduced the problem dealt with in this study and the firm’s goal assumed in trying to solve this problem. Chapter 2 states that leases have four characteristic features in common. First, any lease can be looked upon as a loan providing (almost) 100% financing of the leased asset’s purchase price. Second, the lessee obtains the right only to use the asset. Third, the lessor usually remains the asset’s owner, and fourth, the lease term corresponds with the expected service life of the capital asset. Because of these common features, I first defined the word leasing as such and then looked into the various types of leases. I thereby distinguished between financial and operating leases. With a financial lease, the risk of early obsolescence is largely borne by the lessee, whereas by entering into an operating lease this risk is transferred to the lessor. This is because after having concluded a financial lease contract the financial lessee is irrevocably committed to making the lease payments until at least the leased asset’s purchase price has been repaid to the lessor. On the other hand, an operating lease does not Involve such a fixed future commitment, since the operating lessee is allowed to continue leasing the asset if its operation turns out to be profitable (in some cases it is even allowed to purchase the asset) or to cancel the lease if the leased asset’s service life is considered to be at an end.