| Example A |
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| Lease Purchase VS. Delayed Delivery |
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| Lease purchase finance 3 trucks now over 7 years vs buy one truck in years 1, 4, and 7 for cash |
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| Assumptions: |
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|
Fire Truck Cost = |
$250,000 |
Year 1 |
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|
Inflation rate on fire truck pricing = |
5.00% |
Annually |
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| Financing interest rate = |
3.75% |
Annually |
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|
Estimated lease term = |
7 years |
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|
Lease Payments = |
Annual in Advance |
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|
Estimated total truck purchases = 3 units = |
$750,000 financing |
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| Delayed delivery schedule = 1 truck immediately, then |
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| one truck beginning of year 4, and |
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|
one truck beginning of year 7 |
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| A |
B |
C |
D |
E |
F |
G |
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| Years |
Cumulative |
Annual |
Truck |
Annual |
Annual |
1.50% |
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| Annual |
Total |
Truck |
Purchase |
Budget |
Budget |
= Rate for |
||
| Lease |
Lease |
Purchase |
Total |
Saving |
Savings |
Earnings on |
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| Payments |
Payments |
Price |
Cumulative |
( A - C ) |
Cumulative |
Annual |
||
| w/inflation |
Savings |
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| 1 |
119,330 |
119,330 |
250,000 |
250,000 |
130,670 |
130,670 |
1,960 |
|
| 2 |
119,330 |
238,661 |
0 |
250,000 |
-119,330 |
11,339 |
|
|
| 3 |
119,330 |
357,991 |
0 |
250,000 |
-119,330 |
-107,991 |
|
|
| 4 |
119,330 |
477,322 |
289,406 |
539,406 |
170,076 |
62,085 |
2,551 |
|
| 5 |
119,330 |
596,652 |
0 |
539,406 |
-119,330 |
-57,246 |
|
|
| 6 |
119,330 |
715,982 |
0 |
539,406 |
-119,330 |
-176,576 |
|
|
| 7 |
119,330 |
835,313 |
335,024 |
874,430 |
215,694 |
39,117 |
3,235 |
|
| Totals |
835,313 |
874,430 |
39,117 |
7,747 |
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| ' | ||||||||
| |
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| 7 Year net cost or (savings) to purchase now vs accumulate funds ( A - C - G ) = |
($46,864) |
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