Lease Period Research Articles

Analisis Akad Ijarah Tanah Kas Desa Bulusari Kecamatan Gempol Kabupaten Pasuruan dalam Perspektif Fikih Muamalah

Village cash land is land given to the village government to be managed as one of the village's original sources of income aimed at social interests in village development in improving community welfare. Various ways can be done by the village government to manage village cash land, one of which is through leases. The Bulusari Village Government utilizes village cash land by building shophouses in the Village Market which are then rented to the community. This study aims to determine whether the application of the Bulusari village cash land ijarah contract is in accordance with the principles of muamalah jurisprudence. This research uses field research methods with a qualitative approach because the author goes directly into the field to get information directly from informants. The results showed that the practice of leasing village cash land was in accordance with the principles of muamalah jurisprudence. Aspects such as clarity of the object of the contract (land), rental price agreement, and lease period have been well fulfilled in accordance with Islamic law. The application of ijarah contract on the cash land of Bulusari village helps improve the community's economy, so that the welfare of the community has increased.

Optimal Preventive Maintenance Policy for Equipment Rented under Free Leasing as a Contributor to Sustainable Development

Leasing has proven to be a business model that is perfectly suited to the circular economy. It significantly contributes to sustainable development by enabling the reuse of machinery and equipment after each lease period and by including preventive maintenance and overhauls within and between lease terms. This helps to extend the life cycle of equipment, promote value recovery, and reduce waste. This paper examines an imperfect preventive maintenance (PM) strategy applied to equipment rented under the terms of “free leasing”. In free leasing, the lessor makes the equipment available to the customer for a specified period of time without charging rent. In return, the customer is required to purchase the equipment’s consumables exclusively from the lessor. The lessor is also responsible for the maintenance of the equipment at the customer’s premises. The greater the quantity of consumables used by the customer, the more the equipment will deteriorate. Consequently, the lessor must be able to determine the most effective approach to preventive maintenance, ensuring that it aligns with the customer’s planned usage rate while maximizing profit. This work proposes a PM strategy to be adopted by the lessor during the free lease period. This strategy involves the performance of imperfect PM actions just before the start of the lease period and then periodically. Different packages of preventive actions can be applied each time, with each package having a different cost depending on the level of effectiveness in terms of rejuvenating the equipment. Minimal repairs are performed in the event of equipment failure. The decision variables are the PM period to be adopted and the maintenance efficiency level to be chosen for each preventive intervention. The objective is to determine, for a given customer with an estimated consumption rate profile of consumables, the optimal values of these decision variables so that the lessor maximizes their profit. A mathematical model is developed to express the lessor’s average profit over each lease period. A solution procedure is developed for small instances of the problem, and an Artificial Bee Colony algorithm is implemented for larger instances. A numerical example and a sensitivity analysis are presented.

LEGAL PROTECTION FROM AN INTERGENERATIONAL JUSTICE PERSPECTIVE: A CONCEPT FOR LEASING FREEHOLD LAND IN THE TOURISM AREA IN BALI

In accordance with developments over time and the development of tourism as a business field in Bali, the need for land as a supporting factor for tourist destinations is increasing. For instance, in Bali, several destinations never stop being developed, either in coastal areas, in cities or in the mountains, which have become tourism objects and are balanced with local wisdom as instruments of cultural tourism destinations hence sometimes the need for land to support the tourism activities is obtained by lease often does not take into account for next generations who will obtain the same rights due to a very long lease period. This research mainly discussed the process of leasing freehold land in several areas in Bali and how the rental period for freehold land in Bali shall be regulated to reflect fairness between generations in the future. This is empirical research that focuses on the empirical symptoms that can be observed in real life. The analysis was carried out qualitatively and presented as an analytical description. The research indicated that the process of the right to lease a freehold land in Bali still happens, especially for the tourism business, agreements are made before a Notary as authentic deed, and there shall be a concept in terms of lease period that mentions specific time if the freehold land is being developed for tourism destinations, hence it can be perceived by next generations.

Tinjauan Praktek Akad Ijarah Menurut Hukum Islam: Studi Kasus pada UMKM Kios di Kec. Medan Helvetia

Leasing (ijarah) is a form of muamalah action that is often carried out by humans to fulfil their needs. These needs can be in the form of the benefits of goods or services that are not owned, such as renting out kiosks for MSME business actors in Medan Helvetia Sub-District. However, in some cases, kiosk tenants are often not responsible for the leased kiosk building, such as building damage that arises during the lease period and arrears in water and electricity costs. The purpose of this study is to explain how the practice of ijarah contracts contained in kiosk MSMEs in Medan Helvetia sub-district and explain the practice of ijarah contracts contained in kiosk MSMEs in Medan Helvetia sub-district according to Islamic law. This research uses a type of field research with a descriptive qualitative approach. The data sources used are primary data sources and secondary data sources. Data collection is done by observation, interviews, documentation. Data analysis techniques using qualitative descriptive data analysis techniques. Based on the results of this research, the benefits of objects in the practice of ijarah contracts for MSME kiosks in Medan Helvetia sub-district are permissible in Shara'. When viewed from the validity of the contract, the practice of ijarah contracts for MSME kiosks in Medan Helvetia Sub-District is not in accordance with Islamic law because the conditions for the validity of the ijarah contract have not been fulfilled, which is due to violations committed by the tenant against the object of the lease in the form of damage to the building that appears.

주택임대차 시장 상생방안

In South Korea, the domestic housing supply rate has already exceeded 100% since 2008, but the home ownership rate in 2021 still remains at 57.3%. In response to large-scale Chonse fraud, the government has come up with various solutions, but there is criticism that it is insufficient for a fundamental solution. This paper aims to derive a win-win plan between landlords and tenants in the rental market through legal and institutional improvement.
 First, it is necessary to partially restrict private landlords from freely choosing whether to register as rental businesses. Through this, it is possible to prevent a rental business operator who meets the requirements for rejection of the registration application under Article 7 (7) of the Special Act on Private Rental Housing from entering the rental market. In addition, the tenant's right to claim the return of the deposit can be substantially secured by requiring additional asset requirements for rental businesses of a certain size or larger. Although the lease system has positive factors such as a role as a residential stepping stone and a reduction in housing costs, it basically grants the right to freely dispose of a large amount during the lease period, while the legal protection for its return is insufficient. There have been various legal and institutional efforts to compensate for this, but tenants are still not sufficiently protected. The old customary Chonse was incorporated into Article 303 et seq.(Right to registered lease on a deposit basis) of the Korean Civil Code, but Chonsegwon is rarely used in practice. In terms of the protection of tenants, it is reasonable not to allow Chonse Lease. In reality, it is also possible to consider forcing the registration of leaseholds that are paid a certain amount or more of rental deposits. It is necessary to correct the practice that rental deposits are received much more than collateral purposes. Article 551 (1) of the German Civil Code restricts rental deposits not to exceed three times the rent for one month. It may also be considered to force leaseholds that are paid a certain amount or more of rental deposits to be registered.

Impact of carbon quota allocation on equipment recycling by service-oriented manufacturers: The design of a coordination mechanism

Service-oriented manufacturing is an emerging approach in green manufacturing that involves recycling equipment by collecting, repairing, and returning it to the market after the lease period. This approach is cost-effective and environment-friendly, making it a popular choice among manufacturers. However, while various business models for service-oriented manufacturers have been investigated, less attention has been paid to optimal decisions and contracts to improve the efficiency of the service-oriented manufacturing supply chain under carbon quota allocation policies. For this reason, this study builds a game model, which consists of a service-oriented manufacturer and an operator in two cases, i.e., with or without carbon quota allocation. Our main findings are threefold. First, carbon quota allocation policies can raise the production costs entailed by operators, thereby increasing their threshold to voluntarily undertake equipment maintenance. Second, when the carbon trading price meets certain conditions, the operator's profits increase with the price and are greater than those of the non-carbon-quota policy model. The change in carbon trading price has no direct effect on service-oriented manufacturers, but indirectly affecting their profits. In other words, these profits decrease with carbon trading price. Third, the revenue-sharing contract is more effective in minimizing equipment failures and more environment-friendly when the service-oriented manufacturer's equipment failures are influenced by a range of factors.

Multi-phase preventive maintenance strategy for leased equipment considering usage rate variation

Lessors are responsible for equipment maintenance during the lease period. The usage rate of these equipment affects their failures, reliability and decision-making on maintenance strategy. For some leased equipment, such as those producing seasonal products, the usage rate varies. However, conventional approaches usually set usage rate as a constant. Different from the existing literature, this work considers the variation of usage rate, and proposes a multi-phase preventive maintenance (PM) decision model to determine the PM times and degrees at different phases. The goal is to minimize lessors’ lease service cost by balancing corrective maintenance (CM) cost, PM cost and penalty cost during the lease period. In this model, an age correspondence framework is applied to characterize the variation of usage rate at different phases. An accelerated failure time model and an age reduction model are adopted to capture the effect of variable usage rate and imperfect PM on the equipment’s reliability. To verify the effectiveness of the proposed model, it is contrasted with a PM decision model with average usage rate. The impact of unit PM cost, CM cost, and penalty cost on maintenance strategy is discussed by numerical examples. Managerial insights for maintenance strategy are provided for lessors. The results indicate that the proposed approach considering varied usage rate can change the optimal PM times and degrees, and consequently lead to a lower lease service cost than conventional approaches using average usage rate; lessors need to enhance PM capability and reduce PM cost.

REVIEW OF RISK MANAGEMENT IN RENT TO OWN (RTO) SCHEME IN MALAYSIA

This paper focuses on the review of risk management in Rent to Own (RTO) scheme in Malaysia. The objectives are to review the risk management factors in RTO scheme and the strategies to overcome the risk. This study employs a desktop study by collecting the research papers and data in the online databases. RTO Scheme is a concept that employs the rental market like Private Rented Sector (PRS) in the properties that allows ownership after the tenancy period has been expired. The RTO scheme is a type of financial schemes that allows property leasing for between twelve (12) months to five (5) years and ownership upon the maturity of the leasing period. This is an initiative by the Economic Planning Unit (EPU) and the Ministry of Housing and Local Government (MHLG) to implementing the National Housing Policy 2018-2025. The RTO scheme is for home buyers to have financial planning to rent before they buy. The calculation of the mortgage loan for RTO Scheme is based on the rental income and the rental deposit. Additionally, preliminary case study has been conducted to the RTO schemes through onsite and interview with the Developer. The results are to review the risk factors in the RTO Scheme and the marketing strategies. The outcomes of the research are to give input to the house buyers to be confident to buy houses under the RTO Scheme.

전세사기 발생원인 및 법적 방지방안에 관한 연구

In the last 2~3 years, the sale price of real estate has plummeted, and the news about the crime of rental fraud continues day after day. In this situation, the contents of the government’s recent measures about rental scam can be broadly summarized as prevention, support, crackdown, and strengthening of punishment. Among them, preventive measures include reducing the pre-tax rate subject to tax return guarantee from 100% to 90%, and preventing senior mortgage loans after the contract by providing information on each stage of the contract. If the landlord enters into a contract for the sale of the leased object with a third party during the rental(or lease) period, preventive measures such as requiring the tenant to notify the tenant in advance must be written in the standard contract and provided by the Association of Certified Realtors. On the other hand, it seems necessary to reconsider measures such as providing the credit information of the landlord to individuals such as authorized brokers or lowering the rental price rate in connection with the purchase of rental guarantee insurance. In addition, it is necessary to regulate certified brokers and real estate consulting firms that lead real estate transactions in close contact with the general public, and it is necessary to create institutional conditions for the general public to conduct real estate transactions transparently.

건물분양주택의 발전방안에 관한 연구

This study studied the plan for expanding and supplying pre-sale housing through the analysis of advanced cases. The analysis results are as follows. First, providing publicity and marketability at an affordable pre-sale price and land rental for residential stability is essential. A plan to appropriately recover the market profit is needed. Second, the continuity of supply requires a continuous supply of land in the housing demand area and continuous supply to the vulnerable housing class. Third, it is necessary to set a reasonable pre-sale price considering high-quality materials during initial supply. Fourth, it is necessary to break away from the LH repurchase method, recognize some capital gains, calculate realistic rent, and extend the lease period. As for policy implications, it is necessary to clarify the policy goals of building pre-sale housing, long-term plans for securing public land, and practical support measures to enable social and economic actors to participate in the supply of Building pre-sale housing.

주택임대차와 존속보장

Although the domestic housing supply rate has already exceeded 100% from 10 years ago, the homeowner’s share of housing in 2021 is still at 57.3%. Due to the imbalance between supply and demand, there is a rapid rise in housing prices and a housing shortage in the housing rental market. As a result, housing tenants are suffering from housing instability and economic burden. In the domestic housing rental market, it not only greatly undermines the housing stability of the tenants, but also acts as an obstacle to the welfare and integration of the people. On the other hand, it is worth noting that advanced countries such as Germany, England, and France have already widely guaranteed the rights of lessees without imposing restrictions on the duration of leases since the 1960s and 1970s.
 Recently, there is an opinion that the lease period should be guaranteed for 6 years or longer by extending the minimum period of housing lease or by increasing the number of exercise of the right of renewal lease. From a comparative law point of view, there is no limit on the number of contract renewal rights or the rental period for housing leases. Therefore, from a long-term perspective, it would be desirable not to set the duration of the lease in order to guarantee the stable housing right. However, considering the domestic housing lease situation and legal system, a realistic alternative is not to restrict the exercise of the lessee's right of renewal lease. However, in this case, it is necessary to study the legal theory of the Reasons for refuse to renewal lease under Article 6-3 (1) of the Housing Lease Protection Act. In addition, iit is worth considering introducing the right of defense of poverty in Article 574 of the German Civil Code to strongly protect the housing rights of tenants in need. Furthermore, it is possible to secure the housing stability of the lessee through rent regulation that fundamentally prohibits the opportunity for the lessor to pursue economic interests by changing the lessee.

ANALISIS KONSEP SHAFQATAINI FI SHAFQATIN PADA HYBRID CONTRACT AKAD IJARAH MUNTAHIYA BIT TAMLIK (IMBT)

The hybrid contract provides benefits for Islamic banks and customers. By combining two types of contracts, the parties involved in the transaction can maximize the generated profits. For example, in the ijarah muntahiya bit tamlik contract, two contracts are combined, namely the ijarah (leasing) contract and the sale and purchase contract, allowing the asset owner to sell the asset to the customer at the end of the lease period. There is a debate regarding the permissibility of multiple contracts based on some hadiths of the Prophet. For instance, the hadith regarding the prohibition of combining two transactions in one. Therefore, the use of hybrid contracts in Islamic financial transactions needs to be thoroughly examined to ensure compliance with Sharia principles and not violate Islamic law. This research is a type of normative legal research that examines Islamic legal norms, principles, and relevant doctrines related to the study's theme. The approach used is a conceptual approach intended to analyze concepts within Islamic law to understand their meanings. The hybrid contract in the Sharia-compliant banking product ijarah muntahiya bit tamlik is a permissible contract according to Sharia. In the Ijarah Muntahiya Bit Tamlik transaction, there are factors that underlie the absence of combining two transactions, namely the factor of the same time frame. The implementation of time in Ijarah Muntahiya Bit Tamlik is not simultaneous but gradual. Thus, the Ijarah Muntahiya Bit Tamlik transaction is valid. Furthermore, the permissibility of this transaction is based on considerations of maslahah (public interest), including eliminating difficulties in society, especially in the economic field

Optimal preventive maintenance policy for leased equipment for free with minimum quantity of consumables purchasing commitment by the lessee

PurposeThis paper deals with a particular type of leasing contracts according to which an equipment is leased for free with the condition for the lessee to purchase a predetermined minimum quantity of consumables during each leasing period. Maintenance actions are performed by the lessor and borne by him. Imperfect preventive maintenance is carried out every t time units throughout the leasing period. Minimal repairs are performed following equipment failures. At the end of the leasing period, an overhaul which restores the equipment to “as good as new” state is performed. The equipment is leased many times during its life cycle. The purpose of this paper is to determine the values of the decision variables for the lessor, which are the preventive maintenance (PM) period and the minimum quantity of consumables to be sold to ensure profit.Design/methodology/approachA mathematical model is developed to express the expected maintenance cost per time unit incurred by the lessor as well as his expected profit over the equipment life cycle. The optimal PM period minimizing the maintenance cost is determined first. Then, given the corresponding minimum maintenance cost, the minimum quantity of consumables (the lessor's break-even point) to be purchased by the lessee is computed. A numerical example and a sensitivity study are presented, and the obtained results are discussed.FindingsThe outcome of this work is supposed to help the lessors determining two key values to be included in each leasing contract, namely: (1) the periodicity according to which they will commit to perform preventive maintenance actions such that their average total cost of maintenance is minimized, (2) the minimum quantity of consumables that the lessee must commit to purchasing during the leasing period. This quantity must be between the break-even point and the maximum quantity associated with the capacity of the equipment.Practical implicationsPractically, the objective of this work is first to determine the optimal strategy to be adopted by the lessor in terms of effort relating to PM and second to determine the minimum quantity of consumables that the lessee must purchase during the leasing period such as profit is insured for the lessor.Originality/valueThis type of leasing (for free) has not been addressed in the literature particularly when considering maintenance strategies.

The crazy rich phenomenon in the airline industry: The accountant’s perspective based on IFRS 16

This study aims to find out how the perspective of accountants in Indonesia on their knowledge of the International Financial Reporting Standards (IFRS) 16 which related to the recognition of ownership of private jets rented by Indonesian “crazy rich”. The respondents of this study were accountants in Indonesia with a total of 222 people consisting of 84 registered accountants who were members of professional accounting bodies such as the Indonesian Accountant Association, Institute of Indonesian Public Accountants, and Institute of Indonesia Management Accountants, and 138 accountants who were not registered. The data analysis method is using a different test (t-test) using the assumption of equal variance assumed and not assumed to see significant differences between the two categories of accountants regarding the perspective of recognizing leased assets. The results show that both categories of accountants have the same perspective for approving the recognition of private jets as assets because they are high-value assets even though the lease period is less than or equal to 12 months and agreeing to be part of business operations that increase revenue. Accounting standards for leases guide lessees to categorize them as finance leases that recognize right-of-use assets, lease liabilities, interest, and depreciation costs. Reports that use finance leases will change profitability and debt-to-equity ratios. By understanding the latest standards, accountants will react appropriately in relation to the existing phenomena. This research provides added value and general lessons for parties with an interest in business and especially for accountants that learning the latest standards is very important in order to be able to scientifically respond to social phenomena that occur around us.

The bargain purchase option: Should it be more than an option?

This study examines the bargain purchase option, which gives the lessee the option to buy the leased asset at the end of the lease period at a price significantly less than its fair market value. The study analyses the approach that the laws of Jordan and the United Arab Emirates (UAE) employ to enable the lessee to practice this option (Al-Azzawi, 2013). To achieve this goal, the main foundations and characteristics of the lessee’s option to purchase are studied under both jurisdictions showing that while Jordanian law treats the option to purchase as a contractual choice (Al Khasawana, 2005), the UAE law moved further to protect the option by law. This difference is discussed in terms of its impact on the degree of protection that prospective users of financial leases may enjoy with regard to the bargain purchase option. This article concludes with some results and recommendations for sake of improvement, mainly the need to embrace legal protection of the option to purchase under the Jordanian legal system, and the need to grant the lessee the right to seek compensation in the case of lessor’s failure to transfer the leased property within the period set by the law in the UAE.

Predictive Maintenance and Upgrade Scheduling for Production Line under Multi-period Product-service Paradigm

In the rapidly developing product–service paradigm, a multi-unit manufacturing system will be leased many times during life cycle. Besides maintenance programming for a single leasing period, an upgrade policy is essential to achieve life-cycle profit optimization during sequential periods. This article presents a framework integrating opportunistic maintenance scheduling and upgrade decision for the leased system throughout its life cycle based on a real-time prognostic method. With machine-level prognosis updating, system-level opportunistic predictive maintenance is dynamically achieved by leasing profit-saving calculations during each leasing period. Between successive leasing contracts, the optimal upgrade levels are dynamically determined through upgrade profit-saving maximization. A numerical example of a leased manufacturing line demonstrates the long-term economic effectiveness of this policy. The proposed framework extends traditional opportunistic maintenance policies in both the machine-level prognosis and the system-level upgrade decision. This framework can be applied to a broad range of leased systems with longer service lifetimes.

Analysis of the Wa’d Ijarah Muntahiyah Bi al-Tamlik (IMBT) Contract From the Perspective of Islamic Law and Indonesian Civil Law

Akad Ijarah Muntahiyah Bi al-Tamlik (IMBT) is a lease agreement that ends with the transfer of property rights by way of sale and purchase or grants at the end of the lease period. The ijarah contract and the sale and purchase contract are connected with a promise. Based on the DSN-MUI fatwa number: 27/DSN-MUI/III/2002 concerning IMBT, the promise (wa'ad) is non-binding, thus causing legal uncertainty for LKS and customers. Then the DSN-MUI issued a fatwa number: 85/DSN-MUI/XII/2012. Then the promise (wa'ad) in the IMBT contract became binding (mulzim). Of course, this has an impact on the occurrence of ta'alluq risk and has the potential to meet conditional buying and selling. This research uses normative juridical methods with a statutory and conceptual approach. The results of the analysis show that the legal status of fulfilling promises (wa'ad) in every Sharia transaction and business is binding (mulzim) and has caused many benefits for the Islamic economic community, such as legal certainty and guaranteed contract continuity, especially in the IMBT contract. Viewed from the point of view of Indonesian Civil Law, IMBT contracts or contracts are included in non-named agreements. This is contained in Article 1319, which arises from the principle of freedom of contract (Article 1338), and IMBT contracts also meet the requirements of valid agreements as contained in Article 1320 of the Civil Code and the legal consequences caused by IMBT contracts, namely rights and obligations.

Islamic Solution on the Agricultural Land Leasing Problem: Case of Excessive Time Dispute

The practice of leasing farmland does not always run smoothly. One of the obstacles that are often faced is the excess of rental time by tenant farmers because the plants have not yet entered the harvest period when the rental period ends. On the other hand, the land owner does not want to lose the profit that can be obtained from the duration of the excess lease. This study aims to find alternative solutions to disputes over lease contracts (ijarah). This research is a field research that is used to answer questions related to the process of implementing the practice of leasing agricultural land, the impact of excess rent for owners and tenants, as well as a contract model that can be a solution to conflicts over time in the practice of leasing agricultural land. The data was collected through interviews, the results of which were analyzed using descriptive methods, then conclusions were obtained through an inductive mindset. The data resource comes from Kalikotes, Klaten Regency. This study concludes that the beginning of the lease agreement does not conflict with Islamic law because it has been mutually agreed between the two parties, but at the end of the lease process there is a contract discrepancy. The land owner immediately asks the tenant for compensation for the excess time. The non-compliance with the agreement made by the tenant was caused by things that were completely unpredictable, where the lease period had expired but the rice could not be harvested. Both parties can resolve this conflict in a win-win manner by making a contractnew ijarah or changing the form of the contract at the beginning by using the number of harvests, not the tempo of the year.

The Effect of Land Right Stability on the Application of Fertilizer Reduction Technologies—Evidence from Large-Scale Farmers in China

This article examines the impact of the stability of the management rights of transferred land (TLMR) on the adoption of technologies aiming to reduce the use of chemical fertilizers (ARFTs) based on the survey data of large-scale grain growing households in Anhui, China. Using the IV-Probit model, the present paper defines the stability of TLMR and the results estimated by IV-Probit model shows that a one-year extension of land lease period can increase the probability of using organic fertilizer and soil-testing formula fertilizer by 3.16% and 4.92%, respectively, while contract breaching in the lease period can reduce the probability of using organic fertilizer and soil-testing formula fertilizer by 46.9% and 51.38%, respectively. However, the land-lease period and land transfer contract breaching in the lease period have no significant effect on the use of farmyard manure by large-scale grain growing households. The main conclusion is that improving the stability of TLMR is conducive to prompting large-scale grain growing households to adopt ARFTs, especially the adoption of organic fertilizer and soil-testing formula fertilizer. The government should improve the stability of TLMR by standardizing the form and content associated with land transfer contracts and setting the minimum land-lease term.

Role of Effective Model to Assure Price of Used Cars

Predicting the price of used cars is both an important and interesting problem. According to data obtained from the National Transport Authority, the number of cars registered between 2003 and 2013 has witnessed a spectacular increase of 234%. From 68, 524 cars registered in 2003, this number has now reached 160, 701. With difficult economic conditions, it is likely that sales of second-hand imported (reconditioned) cars and used cars will increase. It is reported that the sales of new cars have registered a decrease of 8% in 2013. In many developed countries, it is common to lease a car rather than buying it outright. A lease is a binding contract between a buyer and a seller (or a third party – usually a bank, insurance firm or other financial institutions) in which the buyer must pay fixed installments for a predefined number of months/years to the seller/financier. After the lease period is over, the buyer has the possibility to buy the car at its residual value, i.e. its expected resale value. Thus, it is of commercial interest to 754 Sameerchand Pudaruth sellers/financers to be able to predict the salvage value (residual value) of cars with accuracy. If the residual value is under-estimated by the seller/financer at the beginning, the instalments will be higher for the clients who will certainly then opt for another seller/financer. If the residual value is overestimated, the instalments will be lower for the clients but then the seller/financer may have much difficulty at selling these high-priced used cars at this over-estimated residual value. Thus, we can see that estimating the price of used cars is of very high commercial importance as well. Manufacturers’ from Germany made a loss of 1 billion Euros in their USA market because of mis- calculating the residual value of leased cars . Most individuals in Mauritius who buy new cars are also very apprehensive about the resale value of their cars after a certain number of years when they will possibly sell it in the used cars market. Predicting the resale value of a car is not a simple task. It is trite knowledge that the value of used cars depends on a number of factors. The most important ones are usually the age of the car, its make (and model), the origin of the car (the original country of the manufacturer), its mileage (the number of kilometers it has run) and its horsepower.