Which factor is included in Lease vs Buy variable considerations?

Which factor is included in Lease vs Buy variable considerations?

• A. Tax rates (state, federal, sales, ppt)
• B. Customer satisfaction
• C. Product color
• D. Marketing expense

Answer: (A)

Taxes and after-tax cash flow drive the lease-versus-buy decision. In comparing owning the asset to leasing it, you weigh the after-tax cost of ownership (depreciation and interest deductions, potential tax incentives) against the after-tax cost of leasing (lease payments and any related deductions). The tax rate affects how valuable those deductions are, so tax rates are a key variable in this analysis. The other factors listed don’t fit as part of the lease-versus-buy financial comparison: customer satisfaction, product color, and marketing expense relate to marketing or product decisions rather than the financing economics of leasing vs buying.

Taxes and after-tax cash flow drive the lease-versus-buy decision. In comparing owning the asset to leasing it, you weigh the after-tax cost of ownership (depreciation and interest deductions, potential tax incentives) against the after-tax cost of leasing (lease payments and any related deductions). The tax rate affects how valuable those deductions are, so tax rates are a key variable in this analysis.

The other factors listed don’t fit as part of the lease-versus-buy financial comparison: customer satisfaction, product color, and marketing expense relate to marketing or product decisions rather than the financing economics of leasing vs buying.