Certified Professional Public Buyer (CPPB) Practice Test

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What is considered in the lease-purchase decision?

The type of property being leased
Cost/benefit analysis comparing owning and leasing
The interest rates available for leasing
The rights of lessees in any agreement

The correct answer is: Cost/benefit analysis comparing owning and leasing

In the lease-purchase decision, a cost/benefit analysis comparing owning and leasing is vital because it allows organizations to evaluate the financial implications of each option. This analysis typically includes assessing the overall costs associated with ownership, such as maintenance, insurance, and depreciation, against the leasing costs, which might include leasing payments, potential tax advantages, and flexibility in terms of upgrading or replacing equipment or property. This type of analysis is crucial because it informs decision-makers of the long-term financial impact and helps ensure that the organization chooses the most advantageous option for its needs and resources. Leases may offer lower upfront costs and greater flexibility, while ownership may lead to long-term savings or asset accumulation. Other considerations, like the type of property, available interest rates, and lessee rights, are relevant in the lease-purchase process but do not fundamentally drive the decision as directly as the financial comparison between leasing and owning. The cost/benefit analysis serves as the core reasoning behind the lease-purchase decision.