Are the rules for leasing cars as simple as they can be?

Discussion Questions
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Are the rules for leasing cars as simple as they can be?
New car rules should be introduced to deal with the current confusion common in car leasing contracts. This move will also make the transaction much easier to understand. However, this will not greatly affect the basic decision of consumers whether to lease or buy a car. Some of the things that need to be simplified include having the dealers disclose their APR and annual percentage rate on leases. This will clarify the choice between lease and loan. New rules should also be enacted that will compel car dealers to spell out their basic prices , the lease fees and insurance as part of the total car cost (Nailor and Lennard, 2007).
Although the accounting treatment for leases (operating versus capital) may be different for individuals versus businesses, are the leasing transactions the same or different?
The transactions for capital leases and operation leases are different in that on the balance sheet, the inception of a capital lease will be recorded as an asset and will also be recognized as a liability by an the same amount as the current value of the minimum lease payments. When it comes to operating leases, no liabilities or assets are recorded on the balance sheet. On the income statement, the payment of capital lease includes interest expense and the principle payment. The operating leases payment on the other hand is treated an operating expense on the income statement. On the cash flow statement, the total cash flow statement remains unchanged by the capital and operating leases. Contrary, the cash from operations include the total lease payment for a specified accounting period (McGregor, 2006).
How do you determine which lease company is going to take advantage of you for a basis for determining if you are going to do business with them?
The first step is to have a good look at the lease being offered. This includes the exact amount one needs to pay at the end of the lease. The residual value together with the purchase option should range between $300 and $600 (McGregor, 2006). The second thing is to determine the market value of the car in an effort to track down the actual value of the leased vehicle. This will help you determine how much it costs to buy the same car from other dealers. This will be retail value of the car. The next step is the find out how much the dealer would pay if he buys the same car at an auction. This will tell you the wholesale value of the car. With this figures, you will be in a better position to determine if a...