Certified Professional Public Buyer (CPPB) Practice Test

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Which of the following is a disadvantage of leasing?

Flexibility in finance management
Higher initial costs
Cost and control
Tax benefits

The correct answer is: Cost and control

Leasing can often limit the control a lessee has over an asset, which is a significant disadvantage. When an organization leases equipment, they do not own the asset; rather, it is the lessor (the owner) who retains ownership. This can restrict the lessee's ability to make modifications, improvements, or decisions regarding the asset without the lessor's consent. Additionally, ongoing lease payments can accumulate, potentially leading to a higher total cost over time compared to purchasing the asset outright. Therefore, choosing to lease instead of buy can result in a loss of control over the asset's use and associated costs, making it a consideration for organizations when evaluating their options. Options indicating flexibility in finance management or tax benefits reflect advantages rather than disadvantages, while higher initial costs may pertain more to purchasing rather than leasing typically.