17.2 : Leasing vs. Buying

Leasing and buying are two distinct approaches businesses use to acquire assets, each offering specific advantages. Leasing is attractive for its lower upfront costs and flexibility, making it ideal for companies with limited capital or short-term needs. 

Conversely, buying provides ownership and long-term cost savings but requires a significant initial investment.

Leasing spreads costs over regular payments, which are tax-deductible as business expenses. It often includes maintenance and allows businesses to upgrade assets at the lease's end, avoiding obsolescence. 

However, leasing can become more expensive, especially if payments for unused or outdated equipment continue. For instance, a small business undertaking a two-year project might lease computers to conserve capital and secure the flexibility to upgrade to newer technology once the lease expires.

On the other hand, buying grants full ownership, offering control, resale options, and depreciation tax benefits. While the initial costs are higher, ownership eliminates ongoing lease payments and can provide long-term financial advantages. 

Maintenance and obsolescence become the owner’s responsibility, making buying more suitable for businesses with stable, long-term needs.

The choice between leasing and buying depends on cash flow, tax benefits, and asset lifespan.