Case 12: Creating a Decision Support System Buy Versus Lease
A leading supplier of grapes to the wine-producing industry in California, On the Vine Grapes, wants to expand its delivery services and expand its reach to market by increasing its current fleet of delivery trucks. Some of the older vehicles were acquired through closed-end leases with required down payments, mileage restrictions, and hefty early termination penalties. Other vehicles were purchases using traditional purchase-to-own loans, which often resulted in high depreciation costs and large maintenance fees. All vehicles were acquired one at a time through local dealers.
On the Vine Grapes has asked you to assist in developing a lease/buy cost analysis worksheet in order to make the most cost-effective decision. Currently the director of operations, Bill Smith, has identified a 2005 Ford F-550 4×2 SD Super Cab, 161.8 in. WB DRW HD XLT as the truck of choice for the business. This vehicle has a retail price of $34,997.00 or a lease price of $600/month through Ford Motor Credit Company.
Here are some basic fees and costs that you need to factor in:
Refundable security deposit $500
First month’s payment at inception $500
Other initial costs $125
Monthly lease payment for remaining term $600
Last month payment in advance No
Allowable annual mileage 15,000
Estimated annual miles to be driven 20,000
Per mile charge for excess miles
Retail price including sales taxes, title $34,997
Down payment $4,000
Loan interest rate 8.75%
Will interest be deductible business or home equity interest Yes
Is the gross loaded weight of the vehicle over 6,000 lbs
Common Costs and Assumptions
Total lease/loan term 36
Discount percent 8.75
Tax bracket-combined federal and state 33%
Business use percentage 100%
Some Particulars You Should Know
1. In the file BUYORLEASE.xls is a template you can use to enter the information.
2. Create a detailed sum
We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.Read more
The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.Read more
The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.Read more
By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.Read more