Lease Decision-Making and Other Factors to Consider

Posted on Oct 3 2016 - 9:08am by Business Day TV

Decision MakingThe decision to buy or lease is something that a business owner has to make on a regular basis. There are tax rules to consider, depreciation and accounting computations, as well as forecasting for sales, supply and demand. There are other factors to consider as well. These include the maintenance cost, after-sales support, equipment downtime, and others.

Accounting and Other Computations

Typically, leasing an equipment goes through a cost-benefits analysis like every other business decision. However, some business books advocate a situational analysis for this decision. This turns out to be a simple decision box where leasing is resorted to if given certain conditions. This makes the decision-making a simple matter of ticking boxes. Essentially, the question becomes, “if the equipment is important, lease it immediately.” Of course, others would lease if the cash flow does not allow for cash purchases.

A finance lease calculator is easily accessible to compute for costs, such as from LeaseMasters.com.au. This simple online tool has one task, and it does it well. You can compare the costs by entering different values for interest rate and principal. There are other online calculators for lease rate and lease payment.

Different Decision Making Processes

It is up to the user if other items are required, in which case, a spreadsheet is necessary. These could include other computations like current value, equipment depreciation, etc. Each company has their own criteria for deciding these things. Some companies buy computers as one-time capital expenditures, while others depreciate computers over three to five years. Still, others lease computer equipment.

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Finance is not just about cash flow and accounting. It is also about future decisions, using variables based on actual transactions.