The assessing whether to buy or lease.

Published: 2020-07-31 15:35:04
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Category: Marketing

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The continued expansion of the healthcare industry has led to a number of revolutions. Firms have had difficulties in assessing whether to buy or lease. As depicted in the LEASE ACCELERATOR, lease has been more helpful than buying in several aspects. The circulating capital can be utilized in other investments such as marketing, diversification and in research and development. Leasing also reduces the cost of asset maintenance which could have been incurred in purchasing. This enables the leasee to transfer such costs to a third party. Technological obsolescence also proves useful in lease financing. Cases of outdated machinery and equipment are eradicated. Transfer of residual risk and tax ownership are also benefits in lease finance. In its scrap form the property is reverted back to the owner .Costs associated with tax payment are borne by the lessor.
Contrary, when not properly managed lease financing can be costly. Use of outdated variables in financial decisions makes a firm to adopt inappropriate decisions. The cash flows should be compared and analyzed before adopting a lease or buy decision. The firm may end up incurring unnecessary costs. Mostly companies use either equity or debt finances .Cost of funds in these scenarios should be assessed in relation to leasing costs. Firms employing a single appraisal method in decision making may pay more than anticipated. Several appraisal methods should be employed since all are based on assumptions and a mistakes made can be corrected by a subsequent appraisal. For a company hence to adopt lease or buy should always consider the profitable decisions.

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