Evaluating the lease vs. purchase decision

Area of Science:

• Financial Management
• Business Operations
• Decision Analysis

Background:

• Practices face critical decisions regarding asset acquisition, balancing leasing versus purchasing.
• Choosing the appropriate financing method significantly impacts a practice's financial health and long-term viability.
• Existing financial models may not fully address the unique circumstances of individual practices.

Purpose of the Study:

• To propose a Net Present Value (NPV) evaluation method for lease versus purchase decisions.
• To provide a foundational model for practices to develop customized financial analyses.
• To guide financial managers in optimizing financing strategies for asset acquisition.

Main Methods:

• Application of the Net Present Value (NPV) evaluation method.
• Comparative financial analysis of leasing versus purchasing scenarios.
• Development of a flexible model adaptable to specific practice needs.

Main Results:

• The NPV method offers a structured approach to quantifying the financial implications of lease vs. purchase options.
• Individual analysis is crucial, as no single financing strategy fits all practices.
• The proposed model serves as a practical tool for informed decision-making.

Conclusions:

• The Net Present Value (NPV) method is essential for evaluating lease vs. purchase decisions in practice management.
• Financial managers and practice leaders should utilize tailored NPV models for optimal asset financing.
• This approach supports strategic financial planning and enhances practice profitability.