Lease Vs. Buy

Essay by sseguchiCollege, Undergraduate June 2005

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Lease Vs. Buy

Draft of Final Paper

Lease verse Buying Decision Making

Buy or to lease, which one does a person choose? Many investors such as buyers or lessors across the world are asking every time they are requiring an asset or property. The answer is never easy, financial manager around the world have to answer these questions at every turn. By calculating the after tax outflows of both options, investors can determine which is more cost effective choice. Some tough questions may be asked before determining whether to lease or buy. This would allow the buyer or lessee to determine or require available options.

Lease verse buying has maintained a large cash flow throughout the years. Cash flow means exactly what the flow of cash is called, cash on hand or the cash that is coming in and out during a lease or buy contract. Unlike buyers, lessee with credit issues or who cannot afford a large down payment can elect a lease to purchase program as way to property ownership.

Buyers who can afford to make a down payments or security deposit has to be paid upfront on any property or assets. Reasoning for this is that all down payments lowers the buyer's monthly payments. If the buyer has 7.0 or higher credit rating, they can receive a 0 down at a low interest rate and that does not affect the buyer's decision that much. Depending on the buyer or lessee situation, leasing or buying can happen on any long-term purchases.


"Capital lease is a contract granting use or occupation of property during a specified period exchange for specified rent," (Mifflin, 2000). A capital lease permits one party to use a property owned by another party. The owner is called the lessor and the borrower is called...