Lease Vs Buy Analysis Corporate Finance -

The real kicker? . In the fast-moving world of EV tech, these vans might be paperweights in five years. With a lease, Midwest could simply hand the keys back at the end of the term. The "Residual Value"—what the vans are worth at the end—was the leasing company’s problem, not Alex’s. Chapter 3: The NPV Showdown

"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." lease vs buy analysis corporate finance

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. The real kicker

Alex started with the purchase model. If Midwest Logistics bought the vans outright for $3 million, they’d get the . Under current tax laws, they could front-load the depreciation, reducing their taxable income significantly in the first few years. With a lease, Midwest could simply hand 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 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.