Example C

Lease Purchase VS. Delayed Delivery

Lease purchase finance 3 trucks now over 5 years vs buy one truck at beginning of years 2 & 4,

and end of year 5 for cash

Fire Truck Cost =

$250,000

Year 1

Inflation rate on fire truck pricing =

5.00%

Annually

Financing interest rate =

3.50%

Annually

Estimated lease term =

5 years

Lease Payments =

Annual in Advance

Estimated total truck purchases = 3 units =

$750,000 financing

Delayed delivery schedule = 1 truck at beginning of year 2, then

one truck year beginning of year 4, and

one truck year end of year 5

A

B

C

D

E

F

G

Cumulative

Annual

Truck

Annual

Budget

1.50%

Annual

Total

Truck

Purchase

Budget

Savings

= Rate for

Lease

Lease

Purchase

Total

Saving

Cumulative

Investment

Payments

Payments

Price

Cumulative

( A - C )

(B-D)

Earnings on

w/inflation

Yrly Savings

160,494

160,494

0

0

-160,494

-160,494

160,494

320,987

262,500

262,500

102,006

-58,487

1,530

160,494

481,481

0

0

-160,494

-218,981

160,494

641,975

289,406

551,906

128,913

-90,069

1,934

160,494

802,469

319,070

870,977

158,577

68,508

2,379

Totals

802,469

870,977

68,508

5,842

5 Year net cost or ( savings ) to lease purchase now vs accumulate funds ( A - C - G )

(74,350)