Question

Is there a time when owning versus leasing is more beneficial? Please explain or share an example. Under what typical financial circumstances would leasing be more beneficial than owning? What are the contributing factors when we discuss leasing?

Answer 1

Leasing is beneficial than owning when company has just started. As revenues in the starting periods aren't ensured or company can't block capital in building equipment and assets. In this case company leases equipment and assets and thus saves capital which is used in rest of the production work.

Also leasing an equipment, makes you maintenance tension free and also decreasing value free as you just use the equipment and don't own it. So after the use you return back the equipment, thus it's value at the end might be zero, but you aren't considered as it wasn't yours.

You need to decide lease rentals and based on that find NPV between leasing asset or owning it . If leasing NPV comes larger than you take the decision of leasing it.