| Buying |
Leasing |
| Owning equipment requires the buyer to be responsible for the entire life of the equipment |
Leasing equipment requires the user to be responsible for the equipment for just as long as he or she is using it and in possession of the asset. |
| Equipment owners are responsible for tracking the asset through its entire life cycle. |
Lessors frequently offer asset management services as part of the lease, transferring the responsibility for tracking the equipment to the leasing company. |
| The owner of equipment must manage all maintenence costs, interest, taxes, and insurance. |
In many leases, the burden of maintenance, interest, taxes and insurance is maanged by the lessor. |
| The owner bears all the risk of equipment devaluation. Obsolescence must be tracked by the owner. |
The end user transfers all risk of obsolescence to the lessor since there is no obligation to own equipment at the end of the lease. |
| Owners must manage the disposal or selling of outdated equipment. This can slow down the upgrade process. |
Leasing allows for easier upgrades, including master leases that allow for additional equipment to be acquired under original terms and automatic upgrades to new equipment and technology. |
| Owners must manage asset liability on their books. Financial accounting standards require owned equipment to appear as an asset with a corresponding liability on the balance sheet. |
Leased assets are expensed when the lease is an operating lease. Such assets do not appear on the balance sheet, which can improve financial ratios. |
| Buying equipment has a greater immediate impact on cash flow, either through an outright purchase or through loan payments historically higher than lease payments. |
Leasing usually has a lower impact on cash flow due to lower payments. |
