When comparing the cost-benefit of leasing versus buying waste management vehicles, several factors need to be considered.

Depreciation: With a lease, the lessor (the leasing company) typically bears the risk of depreciation. This means that the lessee (the business leasing the vehicle) does not have to worry about the vehicle’s resale value, as they can simply return the vehicle at the end of the lease term. When buying a vehicle, the business is responsible for the vehicle’s depreciation. While the vehicle becomes an asset on the balance sheet, its value decreases over time, leading to potential losses when the vehicle is sold or traded in.

Maintenance Costs: Many lease agreements include maintenance and service plans, which can help reduce the overall maintenance costs for the lessee. This can be a significant benefit for businesses looking to control operating expenses. When buying a vehicle, the business is responsible for all maintenance and repair costs. While the business has more control over maintenance decisions, these costs can add up over time, especially for older vehicles.

Tax Benefits: Lease payments are often considered a business expense and can be deducted from taxable income. This can result in lower tax liability for the business. When buying a vehicle, businesses may be eligible for tax deductions such as depreciation and Section 179 deductions. These deductions can help offset the cost of purchasing the vehicle.

Impact on Balance Sheet: Leased vehicles are not typically listed as assets on the balance sheet, which can improve certain financial ratios (e.g., return on assets). However, lease liabilities are recorded on the balance sheet, which can affect the business’s overall financial position. When buying a vehicle, the vehicle is listed as an asset on the balance sheet, which can improve the business’s overall asset value. However, this also means that the business is responsible for the vehicle’s depreciation, which can affect the balance sheet over time.

In conclusion, the decision to lease or buy waste management vehicles depends on the specific financial goals and circumstances of the business. Leasing can offer lower upfront costs, reduced maintenance costs, tax benefits, and potential balance sheet advantages. Buying, on the other hand, provides ownership benefits and potential tax advantages but comes with higher upfront costs and maintenance responsibilities. It’s important for businesses to carefully evaluate these factors and consider consulting with a financial advisor to determine the best approach for their needs.