LEASE CONTRACT (LEASING)

DEFINITION OF TERMS

Terms in leasing include the following:

LESSOR = party who owns the lease asset (party
who leases the asset)

LESSE = the party using the lease asset (tenant party)

LEASE ASSETS = leased assets
 THERE ARE 3 FORMS OF LEASING:

Sale and lease back, i.e. sell and lease back

Operating lease is an operating lease which is
sometimes also called a service lease
A financial lease is a financial lease sometimes also
called a capital lease, also irrevocable and its
financing is fully amortized
 EXAMPLE SALE AND LEASE BACK

Company A owns the ship selling the ship to B, A

receives the proceeds of the sale, then A immediately
leases back the ship and immediately operates the
ship until a certain period of time or until the end of
its economic life
In this case as if A took a loan from B and gave up
the ship as collateral, then B is now the LESSOR and
A becomes the LESSE as long as the lease contract
cannot be canceled
 EXAMPLE OPERATING LEASE

The lessor leases and contracts to finance the

maintenance of the leased assets/vessels, so the
lessor is responsible for maintaining and servicing
the leased equipment/vessel and the maintenance
costs are factored into the lease payment.
This contract is for a very short period compared to
its economic life, this type of contract is canceled at
any time before the expiration of the contract
 EXAMPLE FINANCIAL LEASE

The lessor, in this case, the bank or investor buys a

completely new fixed asset (brand new) then leases it
to the lesse, the prospective lesse can choose for
himself the goods to buy. Then fully amortized,
meaning that the lessor will receive full lease
installments (principal installments plus interest rate
from the lesse)
 INSTALLMENT PAYMENT/RENTAL

There are two ways to pay installments/rent as

follows:
a. Sale and lease back
For example: Selling price before lease back Rp 30
billion
The remaining economic life is 10
years
Interest rate 10 %
Answer :
Po= Rp 30 billion
N/t = 10 year
i = 10 %
Present Value Interest factor (PVIF)/ table C4
Formula = Po = a x PVIF
30 billion = a x PVIF
a = 30 billion / PVIF
a = 30 billion / 6.145
a = 4882 million annually
Every month= 4,882 million /12 = Rp. 407 million every month
b. If interest charges are taken into account,
sometimes the residual value of the debt, the
contract lease installment payment will appear as
follows: (in billion Rp)
1 tahun 0 1 2 3 4 5 6 7 8 9 10
2 Final balance - 30 27 24 21 18 15 12 9 6 3
of principal
debt

3 Basic rent 3 3 3 3 3 3 3 3 3 3
debt
installments

4 10% interest 3 2,7 2,4 2,1 1,8 1,5 1,2 0,9 0,6 0,3
payment

Total rent 6 5,7 5,4 5,1 4,8 4,5 4,2 3,9 3,6 3,3
payments
Then the annual rent/installment payment in the
first year = 6 billion
Monthly = 6 billion/12 = Rp. 0.5 billion