Lease Versus Purchase

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Lease Versus Purchase Should your company lease or purchase equipment? The answer to this depends on circumstance. Leasing equipment can be a good option for business owners who have limited capital or who need equipment that must be upgraded every few years, while purchasing equipment can be a better option for established businesses or for equipment that has a long usable life, both areas will be compared for a decision. Purchasing Before making the decision to purchase or lease a business needs to evaluate how the equipment will be used and the useful life of the equipment. Purchasing equipment has both pros and cons depending on the circumstances. Equipment of any kinds has maintenance and repairs over the years. One advantage…show more content…
Another advantage to leasing is that the company will not have to find a buyer at the end of 3 years when the equipment is no longer needed and regardless of what they sell the equipment for, they still have a $80,000 balance to pay no matter the outcome. The tax advantage isn't as great with leasing as it is with purchasing the equipment but there is still some tax savings. Lower payments and the certainty of knowing all of the financial factors upfront also make leasing a wiser decision. Decision With everything being said the best way to goa would be to lease the equipment. The reason is because if you lease the equipment it would only cost $55,000 a year (Mayo, 2012). Leasing the equipment would guarantee that after the three years is up that you would not be stuck with the equipment for another two years when it is not needed. Leasing the equipment may cost more maintenance wise, each year the maintenance cost would go up $1,000 with it starting at $5,000 in the first year (Mayo, 2012). So leasing the equipment is the best way to go cost wise. It would save a lot of money in the long run. In conclusion the decision to lease the equipment is the best for the company in terms of saving money and also to be able to upgrade/sell the equipment later down the line when it is no longer necessary. The company has limited capital and this will help them save for future investments and needs. Reference Mayo,
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