Buying vs Leasing

Difference Between Buying and Leasing

Buying is an activity where title of ownership is assumed and any risk or rewards thereafter rests with the buyers after the payment of consideration whereas under leasing only  possession and right to use an asset is acquired for a particular period of time in lieu of  a periodic payment where ownership and title is not transferred.

Buying is paying the amount in full and taking ownership of a thing, equipment, an asset or a car. Leasing, on the other hand, is all about taking a thing or an asset on rent. Usually, when a business owner just starts out, they don’t have a lot of money to invest in buying fixed assetsBuying Fixed AssetsFixed assets are assets that are held for the long term and are not expected to be converted into cash in a short period of time. Plant and machinery, land and buildings, furniture, computers, copyright, and vehicles are all examples.read more for their business. As a result, leasing seems to be a better option for them.

But what is the most viable option for the business owner – buying or leasing? And why one of these is so very valuable to a business?

Buying-vs-Leasing

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Buying vs Leasing Infographics

Let’ see the top differences between buying vs leasing.

Buying vs Leasing Infographics

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Key Differences

Buying vs Leasing Comparative Table

Basis for ComparisonBuyingLeasing
MeaningBuying is a complete ownership transfer of a product/asset.Leaning is getting the ownership only to use the product/equipment.
OwnershipFull ownership.Ownership to use.
Exchange value A lot.Much less.
Flexible termsNo flexibility.A lot of flexibility.
Monthly/yearly obligationNo.Yes.
Useful toMedium to big business owners.New business owners.
Useful becauseYou pay an amount and you own it; there are no discrepancies.You pay monthly/annually to use it.
Tax deduction Under Section 179 of the Internal Revenue Code, you can deduct the full cost of the purchased asset.It can be shown as business expenses and can get tax benefits.

Conclusion

Buying and leasing are very important aspects of a business. A business needs to know what to buy and what to take on a lease. If the decision isn’t taken prudently, it will affect the business drastically especially when a business is just starting out.

The most important thing to consider while deciding between buying and leasing is usage. Depending on the ratio between usage and cost, the business owner should take the decision. If the ratio is bigger, buying is a good option; if the ratio is lower, leasing is the right option.

This proportion though doesn’t always work. Because you would see that if you buy the asset, you will save a few thousand dollars in two-three years. In that case, buying would be a better option even if the ratio between usage and the cost is lower.

Buying vs Leasing Video

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This has been a guide to Buying vs Leasing. Here we discuss top differences between buying and leasing along with infographics and comparative table. You may also have a look at these other interesting comparisons.