Lease-Purchase Considerations

Paper Summary:

This paper discusses the various options and alternatives that Bonnesante, a medical production company, faces in deciding whether to lease or purchase capital equipment and facilities. Among some of the considerations it must account for are its cash flows and cash reserves as well as tax liability issues. For equipment that faces rapid obsolescence a lease finance package is likely best, while equipment with a long life-span it is better to purchase from the beginning. But in any event, these decisions are always subject to the individual circumstances of the company in question.

From the Paper:

"The decision to lease equipment as opposed to buying it outright is a complex decision with benefits to both considerations. For the leasing option, companies that have a limited amount of capital or are constrained in their access to capital sources, leasing is the better option. For companies that have no capital issues and that are purchasing equipment that has a long life span, buying the equipment is the best option because the returns on the investment cover a longer period. Yet, there are considerations in both cases that might make the obvious choice the second option rather than the first depending on the individual conditions of each business."

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