Leasing vs. BuyingLeasing vs. BuyingComputers for an Computers for an Engineering FirmEngineering Firm

Project PresentationProject PresentationTeam 1Team 1

EGR 403 – Section 02EGR 403 – Section 026-7:50pm T/Th6-7:50pm T/Th

Our RolesOur Roles

Team 1 MembersTeam 1 Members Jacob Hagman – OrganizerJacob Hagman – Organizer Justino Rojas – Techie Justino Rojas – Techie Micheal Jones – Techie Micheal Jones – Techie John AmirAbbassi – SummarizerJohn AmirAbbassi – Summarizer

Our ProjectOur Project

To analyze the options of To analyze the options of leasing vs. purchasing a set leasing vs. purchasing a set of 50 workstations for an of 50 workstations for an engineering firmengineering firm High End MachinesHigh End Machines Estimating 3 Year TermEstimating 3 Year Term Manufacturers: Dell vs. IBMManufacturers: Dell vs. IBM

Evaluating our OptionsEvaluating our Options

Advantages of LeasingAdvantages of Leasing You can get much more equipment at You can get much more equipment at

once, since you don't have to pay for all once, since you don't have to pay for all of it in a lump sum. of it in a lump sum.

You can spread payments over time on a You can spread payments over time on a regular and predictable basis. regular and predictable basis.

You can afford to keep all of your You can afford to keep all of your hardware at much the same level.hardware at much the same level.

Equipment warranties also often last the Equipment warranties also often last the same period as a lease.same period as a lease.

Evaluating our OptionsEvaluating our Options

Disadvantages of LeasingDisadvantages of Leasing You don't own the equipment so you You don't own the equipment so you

must be more careful what you do with must be more careful what you do with it. it.

You won't want to spend money to You won't want to spend money to customize, expand, or modify the customize, expand, or modify the equipment unless you want to either equipment unless you want to either remove the modifications or lose the remove the modifications or lose the money when the equipment is returned. money when the equipment is returned.

Evaluating our OptionsEvaluating our Options

Advantages of PurchasingAdvantages of Purchasing You own the equipment, so you can do You own the equipment, so you can do

with it what you like, including with it what you like, including upgrading it or throwing it away. upgrading it or throwing it away.

You may be able to resell it while it has You may be able to resell it while it has some residual value some residual value

Evaluating our OptionsEvaluating our Options

Disadvantages of PurchasingDisadvantages of Purchasing Depreciation & Salvage ValueDepreciation & Salvage Value Computers purchased may lead to in-Computers purchased may lead to in-

equivalent workstations. Leading to equivalent workstations. Leading to uneven employee productivity and uneven employee productivity and concerns with morale. concerns with morale.

Evaluating our OptionsEvaluating our Options

Disadvantages of Purchasing Disadvantages of Purchasing continued…continued… Support concernsSupport concerns

Becomes hard to maintain a standard Becomes hard to maintain a standard “machine image” with different hardware “machine image” with different hardware configurations. configurations.

Technicians must be able to maintain a Technicians must be able to maintain a variety of operating systems.variety of operating systems.

As machines age, some parts become As machines age, some parts become impossible or expensive to find. impossible or expensive to find.

AnalysisAnalysis

Monthly Payments are not an Monthly Payments are not an accurate means of economic analysisaccurate means of economic analysis

Annual worth method proved to be Annual worth method proved to be most appropriatemost appropriate

Two percent fixed loan compared Two percent fixed loan compared with lease to buy optionswith lease to buy options

AnalysisAnalysis

-$5,000.00

$5,000.00

$15,000.00

$25,000.00

$35,000.00

$45,000.00

$55,000.00

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

Month

Mo

nth

ly P

ay

me

nt

Fixed 2% loan

IBM Lease to Buy

Cash flow Cash flow diagrams diagrams observedobserved

2% fixed loan 2% fixed loan vs lease to vs lease to buy optionsbuy options

Annual Annual Worth Worth Analysis Analysis done on both done on both scenariosscenarios

-$5,000.00

$5,000.00

$15,000.00

$25,000.00

$35,000.00

$45,000.00

$55,000.00

$65,000.00

$75,000.00

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

Month

Mo

nth

ly P

aym

en

t

Fixed 2% loan

Dell Lease to Buy

ConclusionsConclusions

Take out 2% loan and purchase IBM equipmentAnnual Worth

$101,914

Take out 2% loan and purchase IBM equipmentAnnual Worth

$101,914

IBM LTBAnnual Worth

$84,256

Dell LTBAnnual Worth

$98,326

Take out 2% loan and purchase Dell equipmentAnnual Worth

$91,997

Sensitivity AnalysisSensitivity Analysis

Other Fixed Loan optionsOther Fixed Loan options Increase Annual Benefit to $240,000Increase Annual Benefit to $240,000 No Salvage ValueNo Salvage Value

Web ResourcesWeb Resources Bankrate – Bankrate – www.bankrate.comwww.bankrate.com

Covers small business, real estate, Covers small business, real estate, mortgage, insurance, and credit mortgage, insurance, and credit information. Provides Finance information. Provides Finance calculators and investment advice.calculators and investment advice.

Web ResourcesWeb Resources MSN Money – MSN Money –

moneycentral.msn.commoneycentral.msn.com Provides financial information on loans, Provides financial information on loans,

stocks, leasing, and financial investing. stocks, leasing, and financial investing. Provides great variety of information Provides great variety of information pooled from multiple sources. Can pooled from multiple sources. Can forward to mobile devices. forward to mobile devices.