Question

Reflect upon the differences between purchasing a $30,000 vehicle and leasing it. Provide one scenario in which it would be advantageous for a company to purchase the vehicle and another scenario in which it would be advantageous to lease.

* Please explain clearly your answer. Thank you!

Answer 1

ADVANTAGES OF PURCHASING VEHICLE

• Buying new vehicle for $30,000 will benefit company by obtaining warranties of that vehicle by the manufacturer which will help company for a particular period of time.
• It will give the full rights of the vehicle to the company, as it is own by the company itself.
• The insurance premium of purchased vehicle is less than the leased vehicle, so this will reduce the monthly costs of the company.
• Purchasing the vehicle will give right to the comapny to sell their vehicle anytime in a year.
• It will give flexibility to the company as they can use it anytime throughout the year without making legal documents of leasing.

ADVANTAGES OF LEASING VEHICLE

• If a company leases a vehicle of $30,000 then it will give benefit to the tax paying capacity of the company. And the company do not need to worry about the depreciation costs.
• Company do not needs to invest the whole amount of $30,000 for purchasing a vehicle, it basically reduces the purchasing cost of company.
• Company will have the rights of the vehicle as they have leased it, with completing the easy process of leasing.
• It will give more flexibility to the company as if they want to use it they can otherwise, they can give back that vehicle after the work is done.
• It will not effect the cash flow suddenly, as it gives ease to the company and they do not have to pay huge amount of $30,000 suddenly.