Residual Value and the Value/Risk Trade-off in Lease-Versus-Buy Descisons : Equipment Leasing & Finance Foundation

Entities with limited appetite for residual value risk may choose

to lease assets because of the risk transfer benefit, even when

value economics favor the buy option, provided the value impact

of leasing is not too negative. This article provides a framework

for measuring risk transfer and making the value/risk trade-off in

this situation, including for leases with renewal options, by means

of a value to risk ratio.

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