Two Buy Scenarios

"Lease vs Buy" and "Buy vs Buy"

LseMod is NOT an investment program. LseMod Buy is designed for a user/occupier to compare the costs of ownership with the costs of leasing. In either event, at the end of the analysis term, if leasing you would assume you will move, so if buying, you need to also assume you will move and sell the property.

In the first example (the first 5 reports) two different properties are being compared, one that is available for lease and one that can be purchased. The Mgmt Summary and Key Assumptions reports show the comparison and the differences. Financing for the Purchased property includes a Balloon Loan with the payment amortized over 25 years and the balloon payment due after 5 years.

Typically in a lease vs. buy analysis, the key decision metric is when it becomes cheaper to Buy than Lease based on Cash Flow, either before or after taxes. (See graphs G - 1 and G - 2). When the cumulative cost of Leasing exceeds the cumulative cost of Buying (called the crossover), then buying becomes the preferred route. Historically, the crossover (when buying becomes cheaper than leasing) occurs in years 6 through 8. Note: the crossover is dependent upon the rent, the purchase price and financing.

From an Income Statement perspective, i.e. the annual tax impact that is reported to the IRS, purchasing is almost always cheaper than leasing because in leasing the rental cost is higher than the depreciation cost associated with purchasing (depreciation on the building is usually spread over 39 years). (See graphs G - 3 and G - 4).

In the second example - Buy vs Buy - two different properties are being compared for purchase and use by an owner/occupant.