Good Example Of Lease Vs. Buy Decision Essay

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In order for a company to operate, there are required certain assets that are used for the production of a product or the provision of a service. In order to acquire these assets, the company can choose one of several ways. Two such ways are buying the asset and leasing it. There are certain benefits attached to leasing an asset rather than buying it.
First benefit of leasing an asset is that it does not cost the company a one-time large scale expense. The bank or lending agency pays for the asset and the company can pay that agency back over a large span of time in easy installments. However, eventually the asset comes into the ownership of the company and hence this method is far better than choosing to rent the asset. At the time of the lease, there are established terms regarding the interest rate with which the borrower has to return the lent money (Alexander, 2016).
This interest rate is set in accordance with the kind of asset and the risks associated with it. Another benefit is that the risk of accidental loss of the asset is also divided between the lender and the company and many times the asset is fully insured against accidents. Although the company will eventually be paying more than what they would have paid for buying the same asset while lending it, but the benefit that comes in the form of a predictable monthly expense is still there. It is possible that a company does not have money to buy an asset until it starts selling its products. Leasing is an excellent option for them (Newman, 2006).
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