Reasons for leasing

A successful lease agreement is created so that both the lessee and lessor reap some benefits. Tax and depreciation write-offs are some critical reasons for leasing, but there are several other qualitative reasons for leasing.

In the following scenarios, a firm must decide whether to lease or to buy a particular asset.

Based on your understanding of the advantages to leasing from a qualitative perspective, what is the firm likely to do in each situationlease or buy? Assume all other quantitative factors remain constant.

1/ Company #1: DigiSurgi is a health care consulting company that trains hospitals on new digital surgical tools. The company needs to acquire new equipment to get the trainers accustomed to the technology so that they can transfer the know-how to the hospital staff. DigiSurgi should the new digital surgical equipment.

2/ Company #2: Pearlene runs a vintage-furniture manufacturing company. Considering the current demand of the business, she needs at least five heavy vehicles to transport raw materials from her selected sources and to deliver custom-built vintage furniture to her customers. She is, however, skeptical of whether the business will continue to flourish the same way in the future. She should the heavy vehicles.