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Answered 2007-01-29 14:28:23

It is the essence of the decision; In buying you are presumably having 1 large outflow now - and 1 inflow at a much later time (at disposition), and several compensating tax inflows as there are depreciation considerations that leases don't receive. In leasing you will have several small payment outflows over the same time - which will have a different tax benefit (expenses are tax benefits) - than purchasing. The value (or worth) of the purchase outflow now is clear. The value (or actual cost) of commiting resources to future outflows needs to be calculated, as does the actual value of getting some sum of money in a future period. All based on the very real aspect that time is money...interest over time earns money...money is worth less in the future, etc. (Receiving $1 today is worth a different amount than receiving $1 say in 10 years). In a purely business financial decision, the one which has the lesser cost, lease or buy, would be the one to do.

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