Wasselec’s Moving and Storage Ltd. is a small company based in Hamilton, Ontario. It operates in both the residential and commercial markets. To serve its various clients, Wasselec’s owns two large moving trucks (tractor-trailer units), six medium-sized cartage trucks, two large vans, and two cars. Because its business re- lies on its vehicles, it has always been the company’s policy to purchase new vehicles on a regular rotation basis. Its accountant and vehicle service manager have established guidelines that trigger the purchase of a new vehicle. For example, the large vans are replaced every 200,000 kilometres, the tractors every 10 years, and the trailers every 15 years.
The president of the company, Sylvia Wasselec, recently read an article about the increasing trend toward leasing. She wonders if Wasselec’s should start leasing its vehicles instead of buying them, and has asked Dogan Yilmaz, the chief financial officer (CFO), for guidance in this matter. In turn, the CFO has asked you, a recent addition to the company’s staff, to prepare a summary of the advantages and disadvantages of owner- ship versus leasing.
Required:
Draft a memo to Dogan Yilmaz summarizing the advantages and disadvantages of ownership and leasing, with reference to the types of assets currently owned by Wasselec’s Moving and Storage. The CFO is very busy, so your memo should be concise.