Alternative Use of
Capital

We often hear of clients multiplying the lease rental amount by the number of months in the leases’s term and exclaim that it exceeds the purchase cost. This will always be the case—but there are good reasons for this:

When Leasing
The lease rent amount includes the cost of ‘recovery of principal’ (the investment in the sign) and the cost of financing the investment that is required to build and install the sign—in other words, cost of money. Add to this the cost of service and maintenance of the sign for the duration of the list (which it often includes), and you end up with a rather formidable amount.

When purchasing
This is where we have the up front investment in the sign compared to the sum total of lease payments. When doing the comparison, it would be fairer to ask “How much could I earn on the amount if I invested it instead in stock or equipment that would directly benefit my business?” By adding the returns that could be earned over the lease term to the purchase price, a much better comparison can be made.