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Chapter: Business Science : Merchant Banking and Financial Services : Leasing

Difference between Hire Purchase and Leasing

Leasing: With the finance company, the lessor Hire purchasing: It is transferred to the hirer on the payment of the last installment


Difference between Hire Purchase and Leasing:




Characteristics     

 

Ownership:

Leasing: With the finance company, the lessor

Hire purchasing: It is transferred to the hirer on the payment of the last installment

          

Depreciation:

Leasing: Lessor, and not the lessee is         entitled to claim depreciation tax      shield 

Hire purchasing: The hirer is entitled to claim depreciation tax shield

 

Capitalization      

Leasing: Done in the books of lessor

Hire purchasing: Done in the books of hirer

          

Payments

Leasing: The entire lease payments are eligible for tax computation in the books of lessee

Hire purchasing: Only the hire interest is eligible for tax computation in the books of hirer

 

Magnitude

Leasing: Used as a source of finance, usually for acquiring high cost assets such as machinery, ships etc

Hire purchasing: Used as a source of finance, usually for acquiring low cost assets such as automobiles, office equipments etc

 

Maintenance of asset

Leasing: Lessee in case of financial, Upkeep is the responsibility of the lessor in the case of operating lease

Hire purchasing: It is the hirer‘s responsibility to ensure the maintenance of the asset bought

          

Nature of asset    

Leasing: Asset- as a fixed asset of the lessor 

Hire purchasing:  Shows the asset either as a stock in trade or as receivables

 

Down payment

Leasing: No down payment required

Hire purchasing: It is required


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Business Science : Merchant Banking and Financial Services : Leasing : Difference between Hire Purchase and Leasing |


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