Analyzing Capital Leases

E.B. 97-16Financial leases are becoming increasingly important as a method for farmers to obtain control of business assets. A variety of leasing alternatives are being offered for an array of buildings, machinery and livestock. Thus, many farmers and farm advisors are faced with the need to compare leasing to purchase with borrowed funds. Because many of the basic characteristics of leasing are different from loans, this analysis is usually more complex than a comparison of alternate loan proposals. The objective of this paper is to outline the issues and analysis procedures that can be used in assessing leasing alternatives