General Studies · Lease vs Buy
A newly incorporated manufacturing company with low initial tax liabilities and high capital requirements is debating between acquiring core machinery through a Bank Term Loan or an Operating Lease. From the perspective of the lessee's financial strategy, the most significant rationale for choosing the Operating Lease is to:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Fully utilize the tax shield benefit on accelerated depreciation from the beginning.
- 2Avoid the initial cash outflow for margin money and preserve liquidity.✓
- 3Reduce the interest rate burden, as lease payments are generally lower than term loan EMIs.
- 4Gain the right to own the asset automatically at the end of the lease term.
Correct answer
Avoid the initial cash outflow for margin money and preserve liquidity.
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