close this bookVolume 2: No. 02
View the documentNews -- computer industry
View the documentNews -- women's issues; discrimination
View the documentNews -- investment
View the documentDiscussion -- bankruptcy; home sale; moving expenses
View the documentDiscussion -- leases
View the documentDiscussion -- U.S. law; expert-system liability
View the documentDiscussion -- patents
View the documentNews -- Asian computing
View the documentNews -- job opportunities
View the documentComputists -- Kurt Christensen; corrections

If you decide to lease equipment instead of buying, watch for the following terms. A capital lease is carried on your balance sheet as a long-term debt. (Your banker may object to the additional leverage.) An operating lease is usually for a shorter term -- often with maintenance provided -- and does not appear on your balance sheet. Either of these may be a true lease under federal income tax law: you deduct lease payments as expenses and the lessor owns and depreciates the equipment. A true lease may include an option to buy, which typically increases the lease payments. A capital or operating lease can also be a finance lease, which is a noncancelable, long-term lease where you pay the insurance and maintenance. If you are committed to several years of payments, it may be a full-payout lease. (It's like buying on credit, except that you don't get title.)

A leveraged lease is where you put some money down and finance the rest through a third party. The equipment owner -- or "lessor" -- gets tax benefits, which may reduce your cost [if you negotiate]. A master lease is like a credit line where the original terms can be extended to specified additional equipment. A net lease is one where you -- the "lessee" -- pay the insurance, maintenance, and taxes. This is common for long-term leases. Finally, an open-end lease is a conditional sale (of a vehicle, typically) where you guarantee that the lessor will receive a specified minimum value at the end of the lease. [Bruce G. Posner, Inc., 11/91.]