Which of the following statements comparing loans and leases is FALSE?
A)Because we are getting the entire asset when we purchase it with the loan,the loan payments are higher than the lease payments.
B)In a perfect market,the cost of leasing and then purchasing the asset is equivalent to the cost of borrowing to purchase the asset.
C)With a lease we are financing the entire cost of the asset;with a standard loan we are financing only the cost of the economic depreciation of the asset during its life.
D)The amount of the lease payment will depend on the purchase price,the residual value,and the appropriate discount rate for the cash flows.

Question

Quizplus · Accepted Answer

With a lease, you are typically financing the cost of using the asset, not the entire cost of the asset. In contrast, with a loan, you are financing the purchase of the asset, which includes the entire cost minus any down payment.

Which of the Following Statements Comparing Loans and Leases Is