incremental borrowing rate

Definition

The stated rate of a lease used for comparative purposes, that a lessee would be required to pay on a loan to acquire the same property that is being leased. The basis of economic comparison to determine whether a lease is more advantageous than a direct purchase considering all costs, fees and assessments.

Use this term in a sentence

I did not know the incremental borrowing rate and it made me wonder a few things about what I was doing.

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You should try and shop around to get the best incremental borrowing rate you can on your new big purchase.

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My boss agreed that we should rent a building to open our new store in Galveston because he reviewed the incremental borrowing rate and saw that the lease would be advantageous.

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incremental analysis incremental capital output ratio (ICOR)