Mobile dental units: leasing or buying? A dollar-cost analysis.
BACKGROUND
The decision to acquire a mobile dental unit is based on a standard capital budgeting analysis. The next step is to determine whether to obtain the use of the mobile dental unit by borrowing and purchasing or by leasing. As a financing mechanism, leases are simply another way of borrowing money to pay for the asset.


OBJECTIVE
To compare lease vs. debt as financial vehicles to acquiring a mobile dental unit.


METHODS
An estimate for a new mobile unit was obtained. Lease and loan proposals from financial lenders were collected. A cost of capital rate was chosen for comparison. Cash flows associated with borrowing and leasing vs. buying were determined fortwo different scenarios: for profit (FP) vs. not-for-profit (NFP), at 5 years. A dollar-cost analysis was utilized to determine the option with the lowest capitalized value.


RESULTS
There was a net advantage to buying vs. leasing for both for FP and NFP organizations. Due to tax advantages, owning and leasing were substantially less expensive for FP than for NFP. Slight decreases in the monthly lease payments would make leasing competitive to the buying approach.


CONCLUSIONS
Exploring alternative financing vehicles may allow dental programs to expand their services through the acquisition of a mobile unit. Though programs generally own assets, it is the use of the asset which is important rather than the ownership. Dental programs can find leasing an attractive alternative by offering access to capital with cash-flow advantages.
Arevalo
Oscar
O
Department of Pediatric Dentistry, University of Puerto Rico School of Dental Medicine, San Juan. oscar.arevalo@upr.edu
Saman
Daniel M
DM
Bonaime
Alice
A
Skelton
Judy
J
D002017:Budgets; D002201:Capital Expenditures; D002202:Capital Financing; D003365:Costs and Cost Analysis; D003752:Dental Health Services / Q000191:economics*; D003862:Depreciation; D005376:Financial Management / Q000191:economics; D006801:Humans; D007860:Leasing, Property / Q000191:economics*; D008283:Maintenance / Q000191:economics; D008952:Mobile Health Units / Q000191:economics*; D010067:Ownership / Q000191:economics*; D013660:Taxes