Entering the LvB
The Lease Versus Buy workspace contains four tiles, each with data that must be populated.
Download a PDF version of the guide.
Participants Tile
On the Participants tile, you will enter the relevant data regarding the LvB analysis that you are about to perform. Key participants include:
BU (Business Unit): Also known as SBU or Strategic Business Unit. This is an internal operating and reporting group.
Lessee: The legal entity that is entering into the lease transaction that is being evaluated.
Geographic Area (Geo): Refers to the location (country) where this lease transaction is being contemplated.
Analyst: Employees responsible for generating the Lease vs. Buy.
Order Administrator: Employees who have procurement responsibility for the leased assets, shepherding the administrative process in your organization to finance the acquisition of equipment and securing its delivery to the asset user.
Step |
Action |
|---|---|
1 |
Go to the Lease vs. Buy workspace from the Left NavBar. |
2 |
On the Participants tile, select the appropriate BU, Lessee, Geo, Analyst, and Order Administrator. |
3 |
Proceed to the Details tile. |
Details Tile
On the Details tile, you enter the asset-level information regarding the transaction you are evaluating from an acquisition method perspective. In the pop-up, the only items needed for the LvB Analysis to run are the Product category, Quantity, and Unit Price. You may add additional information for the specific asset, which will be helpful for other activities related to this particular transaction down the road. If you have multiple assets that you want to include in the LvB analysis, you can add other assets as necessary.
Step |
Action |
|---|---|
1 |
On the Details tile, click the plus sign to add an asset. |
2 |
Select the appropriate Product Category. Note: LeaseAccelerator’s Lease Versus Buy functionality is for equipment only. |
3 |
Enter any relevant information for Product Number, Manufacturer, and Description. |
4 |
Enter the Quantity. |
5 |
Enter the Unit Price. |
6 |
Click Add. |
7 |
Repeat steps 1-6 as necessary for additional assets. |
8 |
Check the box labeled Are the assets specialized for lessee use? if the assets meet the standard’s conditions. Note: This selection applies to all assets on the lease. |
9 |
Proceed to the Terms tile. |
Terms Tile
On the Terms tile, you specify the details of the lease structure that you are contemplating for this transaction. Key data points include:
Payment Based On: The default is Lease Rate Factor (LRF), which is the most common method for lease quotes (industry-standard method); however, you may choose fixed or floating interest rate if applicable.
Lease Type: The default is True/Operating Lease (FMV), but the list has a number of choices to select from. The reason for the default being a True/Operating Lease (FMV) is that it has a residual position built into it, which makes it advantageous as a financial structure when compared to buying the asset outright, as you typically end up paying less than 100% of the original cost of the equipment.
Frequency: Indicates how often you will make lease payments.
# of Payments: Indicates the term of the proposed lease.
Mid-Term/EOT Options: The default is to return the leased asset at the end of the initial term. As the LvB analysis is a mathematical calculation, the system has to be given definitive guidance as to what the lease structure will look like. This means that the only two valid choices for the end-of-term selection are to return the asset at the end of the initial term or to buy it out. If your intent is to buy it out, you will have to specify what the buyout price will be in dollar terms.
Step |
Action |
|---|---|
1 |
On the Terms tile, select the Payment Based On from the drop-down. |
2 |
Next, select the appropriate Lease Type. |
3 |
Select the Frequency from the drop-down. |
4 |
Populate the number of payments (term) based on the frequency. |
5 |
Populate other related fields according to the terms of the transaction you are evaluating. Red fields are required. |
6 |
If your transaction has step payments, click Payment Schedule Calculator, populate the necessary fields in the pop-up, and click Submit. |
7 |
Interim Rent is by default no, and for the purpose of the LvB analysis, that is what you should assume to run the analysis. You typically will not know what any amount of interim rent is until the transaction has been executed. |
8 |
If you wish to change the EOT Option from Return to Buyout, click Mid-Term/End-of-Term Options and edit the single option, changing the type from Return to Buyout. You must indicate the buyout price. |
9 |
Proceed to the Analysis tile. |
Analysis Tile
The Analysis tile contains the data points needed to generate the actual comparison. All the pre-configured values are tied to the Lessee entering into the transaction or its parent Lessee. Once you enter a Commencement Date, pre-configured values will populate.
Step |
Action |
|---|---|
1 |
On the Analysis tile, enter your Lease vs Buy Analysis #. This is a unique identifier for this LvB. |
2 |
Select the estimated Commencement Date. Once this date is populated, other fields will be auto-populated based on the Lessee, Geo, and Commencement Date. |
3 |
If you have any Leasing or Purchase Fees, populate the relevant fields. |
4 |
If your transaction is in a currency other than USD, change the Currency drop-down. |
5 |
The Economic Life and Depreciation Method should auto-populate based on the Product Category and Lessee, but you may change as necessary. If you change, you will be required to enter Notes below with an explanation. |
6 |
If you have not pre-configured your Salvage Values based on Product Categories, you may change the default 0.00 if necessary. |
7 |
The IBR, Debt Rate, NOL Final Year, Federal Tax Rate, and State Tax Rate will auto-populate if you have pre-configured your Settings. You may override these values but must provide an explanation in the Notes section for doing so. |
8 |
Once all fields on all tiles are populated, click Save to save and return to workspace later. |
9 |
If you are ready to generate the analysis, click Lease vs. Buy. |
10 |
A PDF of your analysis will be generated. |