Alex mapped out the purchase price, the tax savings from depreciation, and the estimated salvage value (the "leftover" cash when they sell the vans later), all discounted at the company's after-tax cost of debt.
Midwest Logistics signed the lease. Alex saved the cash, the warehouse got built, and the fleet stayed green.
Next, Alex looked at an operating lease. The leasing company offered a five-year term. The payments were higher than the interest on a loan, but they were as an operating expense. lease vs buy analysis corporate finance
Alex opened Excel to calculate the .
The math was tight. Owning had a slight edge on paper because of the high salvage value Alex assumed. But when Alex factored in the and the fact that a lease preserved cash for the warehouse project, the "hidden" value of the lease started to shine. The Conclusion Alex mapped out the purchase price, the tax
Sarah looked at the NAL calculation. The lease was slightly more expensive in a vacuum, but it saved the warehouse project. "Flexibility is an asset we can't see on the balance sheet," she admitted.
Alex sat in the dimly lit office of Midwest Logistics , the hum of a dying HVAC system a constant reminder of the company's aging infrastructure. As the newly minted Director of Finance, Alex had one job: modernize the delivery fleet without sinking the company’s cash reserves. Next, Alex looked at an operating lease
"If we buy," Alex explained, "we are betting $3 million that EV batteries won't double in efficiency by 2030. If we lease, we pay a small premium for the right to walk away and upgrade when the tech improves."