Lease versus Buy

The lease versus buy analysis has always been a crucial way for companies to determine which option will suit their businesses best. The new leasing standards require additional reporting for certain types of leases compared to the previous standards. However, many of the same financial benefits and drawbacks as before are still present and should be considered in the decision making process for your business.

Key Considerations

1. What are the cash flow needs of the company? What kind of down payment would purchasing an asset require? What kind of payments would leasing the asset require?

2. How will leasing assets impact financial metrics compared to purchasing the assets? Consider Return on Asset and debt covenants.

3. Is the asset likely to become obsolete in a few years? Consider computers, medical equipment, and other technology based assets.

4. How will the asset be taxed differently if it is leased versus bought?

What the Experts Think

The new lease accounting standard's impact on the lease vs. buy decision

July 12, 2016

This document reviews the reasons why businesses lease, and determines that the benefits they gain from this decision will not change under the new standards. The article lists the reasons why businesses should still choose to lease rather than buy.

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