Lease vs Buy

Compare the present-value cost of leasing an asset against buying it, after tax shields on depreciation and lease rentals.

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Inputs

Asset cost (buy) (₹)

Annual lease rental (₹)

Term (years)

Discount rate (%)

Tax rate (%)

Depreciation (% SLM)

Salvage value at end (₹)

Recommendation

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PV of cost

Indicative. Lease cost = PV of after-tax rentals. Buy cost = asset cost − PV of depreciation tax shields − PV of after-tax salvage. The lower PV of cost is preferable. Interest on borrowing to buy, GST/input credit and balance-sheet effects (Ind AS 116) are not modelled. Confirm assumptions.