Explanation

The net advantage to leasing is the monetary savings to a lessee by leasing an asset rather than purchasing it. The net advantage to leasing compares the present value of after-tax cost of owning the asset to the present value of after-tax cost of leasing of such asset. It compares the two costs and assists the lessee in opting for the more profitable alternative. If the cost of leasing is less than the cost of owning, the asset shall be leased, otherwise purchased.

Verified Answer

The net advantage to leasing (NAL) is defined as the savings earned by the lessee through leasing an asset rather than purchasing it. It is derived by comparing the cost of leasing of the asset to its purchase cost and choosing the more profitable alternative.