| Example B |
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| Lease Purchase VS. Delayed Delivery |
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| Lease purchase finance 3 trucks now over 5 years vs buy one truck per year for next 3 years |
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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 = |
3.50% |
Annually |
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|
Estimated lease term = |
5 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 2, and |
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| one truck beginning of year 3 |
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| A |
B |
C |
D |
E |
F |
G |
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| Years |
Annual |
Cumulative |
Annual |
Truck |
Annual |
Annual |
1.50% |
|
| Lease |
Total |
Truck Price |
Purchase |
Budget |
Budget |
= Rate for |
||
| Payments |
Lease |
w/inflation |
Price |
Saving |
Savings |
Earnings on |
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| Payments |
Cumulative |
( A - C ) |
Cumulative |
Annual |
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| Savings |
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| 1 |
160,494 |
160,494 |
250,000 |
250,000 |
89,506 |
89,506 |
1,343 |
|
| 2 |
160,494 |
320,987 |
262,500 |
512,500 |
102,006 |
191,513 |
1,530 |
|
| 3 |
160,494 |
481,481 |
275,625 |
788,125 |
115,131 |
306,644 |
1,727 |
|
| 4 |
160,494 |
641,975 |
0 |
788,125 |
-160,494 |
146,150 |
0 |
|
| 5 |
160,494 |
802,469 |
0 |
788,125 |
-160,494 |
-14,344 |
0 |
|
| Totals |
802,469 |
788,125 |
14,344 |
4,600 |
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| 5 Year net cost or ( savings ) to lease purchase now vs accumulate funds ( A - C - G ) |
9,744 |
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