Flexibility: Combines elements of both operating and finance leases, allowing for
a tailored agreement.
Asset ownership choice: Offers the lessee the option to purchase the asset or
return it at the end of the lease term.
Complexity: Can be more complex to negotiate and administer due to its
Potentially higher costs: Depending on the terms chosen, it may have higher
costs compared to a pure operating lease.
Now, considering the lowest risk, it largely depends on your specific circumstances. Generally, operating
leases tend to have lower risk because they offer flexibility and lower upfront costs. You can avoid the
long-term commitment and the financial leverage associated with finance leases. However, the right
choice depends on your financial goals, the type of asset, and your long-term plans.
In a formal context, it's essential to consult with a financial advisor or accountant to assess which lease
type aligns best with your specific needs and risk tolerance in your finance course.
Brigham, E. F., & Ehrhardt, M. C. (2020).
Financial Management: Theory and Practice
(16 ed.). Boston,
MA, United States: Cengage Learning, Inc. Retrieved August 03, 2023