Below are some of the advantages and disadvantages of using the annuity method or system :

Advantages:

• Useful method to use in respect to long-term lease which generally involve considerable capital outlay
• Interest on capital investment is taken into account. This method is perceived to the most exact, precise and scientific form from the point of view of calculations.

Disadvantages:

• Though interest is taken into consideration but the rate is still arbitrary and not based on law
• Computation using this method becomes more complicated where there are frequent additions, dismantling, etc taking place. Not so suitable for assets like Plant & Machinery.