Business decision that compares the cost and benefits of a lease arrangement with the cost of a purchase. The customer may choose to lease a photocopy machine because leasing requires a smaller initial capital outlay and enables the lessee to upgrade, downgrade, or eliminate the copier as the lessee's business needs change. Thus, the lessor derives more profit over the useful life of the copier by leasing it than by selling it. A lease agreement is often easier to sell than an outright purchase because the risk to the customer is lower. Some lease agreements give the lessee an option to buy at later time and to apply some lease payments to the purchase price. See also make-or-buy decision.
