Lease vs. Buy Differences

Buy or Lease -- Buying involves simply purchasing a particular item, generally by financing it if the item is expensive (Pine Grove, 2005). Leasing involves a contract process similar to renting, where the person that leases the item will decide at the end of the lease term whether to purchase the item that was leased (Pine Grove, 2005).

Advantages to Both Options -- The advantages to buying include total ownership of the item, no contract (other than financing), and no regulations on how or where the equipment purchased can be used. Advantages to leasing include just 'borrowing' the equipment for a while when it is needed, and often a lower price for leasing than buying would cost over the same time period.

Financial Considerations -- These considerations include the option price for the buy-back of the leased product, the interest rates that often differ between buying and leasing, the future resale value of the equipment or product that is purchased or leased, and the penalties that may be incurred if the leased item is used improperly (going over the allotted mileage allowance when leasing a car, for example).

Tax Considerations -- How taxes will be affected is also an important consideration when products are leased or purchased. When something is purchased, the interest can often be written off on taxes, especially if the individual is self-employed (Rosenberg, 2001). Also important, Depreciation can be taken on equipment that is used for business when an item is purchased, but the depreciation on leased items varies greatly from the depreciation rules for purchased items.

Personal Consideration -- Most articles that deal with leasing vs. buying, especially for vehicles, indicate that there are many variables, and looking at all of them thoroughly is the only way to make a complete, accurate, and personal decision as to whether to lease something or to buy it.

Works Cited

Pine Grove Software. (2005). Lease V. Buy Advisor. Retrieved 31 August, 2005 from http://www.pine-grove.com/financial%20advisors/lease.htm

Rosenberg, E. (2001). Tax Bytes. Retrieved 1 September, 2005 from http://taxmama.com / Articles/rentvbuy.html