Final answer:
When choosing between leasing and purchasing with an installment note for equipment valued at $118,000 after 21 months, one must consider total costs including down payment, monthly payments, and over-mileage charges for leasing versus the benefits of ownership and potential for higher resale value when purchasing.
Step-by-step explanation:
To determine whether purchasing with an installment note or leasing is the better option for a piece of equipment with a total value of $118,000 after a 21-month period, several financial factors must be considered. While leasing tends to have lower down payments and monthly payments, it may include additional costs such as charges for exceeding mileage limits. Purchasing with an installment note usually results in higher monthly payments, but it allows for ownership and no mileage limits.
Purchasing an asset provides potential benefits like depreciation and the possibility of a higher resale value if the equipment maintains its value better than expected. To accurately evaluate which option is better, you would need to compare the total cost of leasing, including any potential over-mileage charges, to the total payments made when purchasing with an installment note over the same period. Additionally, particularly in a business context, considerations such as tax implications, the importance of ownership, and usage requirements can play significant roles in this decision.