Lease Vs Buy Analysis Corporate Finance -

The CEO, Sarah, wanted 50 new electric vans. "Buy them," she’d said. "We own our assets. We don’t rent."

Alex started with the purchase model. If Midwest Logistics bought the vans outright for $3 million, they’d get the . Under current tax laws, they could front-load the depreciation, reducing their taxable income significantly in the first few years. lease vs buy analysis corporate finance

"If we buy," Alex explained, "we are betting $3 million that EV batteries won't double in efficiency by 2030. If we lease, we pay a small premium for the right to walk away and upgrade when the tech improves." The CEO, Sarah, wanted 50 new electric vans

Next, Alex looked at an operating lease. The leasing company offered a five-year term. The payments were higher than the interest on a loan, but they were as an operating expense. We don’t rent

The math was tight. Owning had a slight edge on paper because of the high salvage value Alex assumed. But when Alex factored in the and the fact that a lease preserved cash for the warehouse project, the "hidden" value of the lease started to shine. The Conclusion

Alex mapped out the after-tax lease payments.