Comparison of Construction Machinery Equipment Leasing and Purchase

1 Analysis and Comparison of the Business Process of Machinery Equipment Leasing and Purchase

Paying attention to economic efficiency is an eternal rule in the business activities of a company. This is the case for construction companies, and the same applies to leasing companies. In the course of business operations of a construction company, if equipment is purchased, the investment will start and the proceeds will follow. The leased machinery and equipment will be invested (rent payments) and proceeds will occur during the course of business operations. It is precisely because of this difference that the capital investment of construction companies is distributed differently in time. Due to the time value of funds, two different modes of operation are brought about, resulting in different economic benefits. Through the analysis of the economic benefits of the two different operating methods, the optimal decisions for leasing and purchasing are obtained. We assume that a construction company needs to purchase a mechanical equipment worth 1 million yuan (with a life cycle of 5 years and no residual value) to complete a construction contracting task with a duration of 5 years. It is expected that the mechanical equipment will receive 300,000 yuan per year. Profit, the rate of return required by the company is 12%.

(1) Calculation of the business process of purchasing machinery and equipment: P=100 (ten thousand yuan); i=12%; n=5 (years); A=30 (ten thousand yuan) Based on the annuity present value coefficient and net present value calculation formula, The value of PW1 to appear is: PW1=A(P/A,i,n)-P=8.12 (ten thousand yuan)>0, indicating that the purchase of machinery and equipment to engage in the construction contracting operation program of the project is feasible and as required Yield (i=12%), a profit of RMB 81,200.

(2) Business process calculation of leasing machinery and equipment: From the above analysis, we can see that it is feasible and profitable for construction companies to purchase the machinery and equipment for operation, but it is not the best option. Calculating the business process of the equipment, it is assumed that the construction company can lease the same mechanical equipment (worth 1 million yuan) from the leasing company, the leasing company requires a return on investment of 10%, the payback period is 5 years, and the residual value is not calculated. The leasing company requires that the rental payment method be uniform rent (equal year value) and the end of the period of payment. If the rent payable by the construction enterprise at the end of each year within five years is A, then: A=100 (A/P,i,n)=26.38 ( Million). The construction company leases machinery and equipment to operate. At the end of each year, it will also receive a profit of 300,000 yuan, and it will also pay the rental company's rent of 263,800 yuan. The value of PW2 to appear is: PW2=a(P/A,i,n)=(30-26.38)(P/A,10%,5)=1,37,200. PW2 = 137.2 thousand yuan> 0. It shows that the operation of the leasing institution's equipment is feasible, and it is clear that the profit at the required rate of return is PW2 > PW1, which means that leasing machinery and equipment business can create more profit than buying equipment. Similarly, PW1>PW2 is better than leasing equipment when it purchases machinery and equipment; PW1=PW2 is equivalent to leasing when it purchases machinery and equipment. The optimal decision on how to make a profit depends on the budget of the equipment construction company's use of the equipment and the environment at that time.

2 Main Reasons Affecting Equipment Leasing and Purchase
The above example is an economical analysis of the rental and purchase of equipment in an ideal state and in a specific environment using data. However, in the real environment, there are many uncertainties. In the end, what kind of operation is the best economic benefit. This requires consideration of the following factors:

(1) If the economic life of equipment purchased is not less than the service life, this type of equipment can achieve certain economic benefits throughout the entire life cycle, and the service life can be prolonged if the maintenance and maintenance are performed well. The purchase must be more economical; The economic life is much lower than the service life, in which case leasing may be the best option;

(2) If the local equipment leasing industry has a high degree of marketization, competition is relatively sufficient, and the lease has a greater advantage, the construction equipment required for the project construction can be obtained in the local area to the greatest degree;

(3) If the investment in fixed assets and operating costs of purchased equipment exceeds the total cost paid for using the equipment lease method, lease will have an advantage; otherwise, the purchase will have advantages;

(4) The impact of the lease or acquisition on the progress, quality and cost of the project. The rapid development of modern science and technology, and the rapid upgrading and upgrading, the purchase of equipment tends to lead to shortened technical life, reduced efficiency, the progress of the project, construction quality is difficult to guarantee, not economic, and the use of lease forms can avoid this risk to a certain extent.