Leasing vs. Buying Computers for an Engineering Firm

1
Leasing vs. BuyingComputers for an Engineering
Firm

• Project Presentation
• Team 1
• EGR 403 Section 02
• 6-750pm T/Th

2
Our Roles

• Team 1 Members
• Jacob Hagman Organizer
• Justino Rojas Techie
• Micheal Jones Techie
• John AmirAbbassi Summarizer

3
Our Project

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

4
Evaluating our Options

• Advantages of Leasing
• You can get much more equipment at once, since
  you don't have to pay for all of it in a lump
  sum.
  
• You can spread payments over time on a regular
  and predictable basis.
  
• You can afford to keep all of your hardware at
  much the same level.
  
• Equipment warranties also often last the same
  period as a lease.

5
Evaluating our Options

• Disadvantages of Leasing
• You don't own the equipment so you must be more
  careful what you do with it.
  
• You won't want to spend money to customize,
  expand, or modify the equipment unless you want
  to either remove the modifications or lose the
  money when the equipment is returned.

6
Evaluating our Options

• Advantages of Purchasing
• You own the equipment, so you can do with it what
  you like, including upgrading it or throwing it
  away.
  
• You may be able to resell it while it has some
  residual value

7
Evaluating our Options

• Disadvantages of Purchasing
• Depreciation Salvage Value
• Computers purchased may lead to in-equivalent
  workstations. Leading to uneven employee
  productivity and concerns with morale.

8
Evaluating our Options

• Disadvantages of Purchasing continued
• Support concerns
• Becomes hard to maintain a standard machine
  image with different hardware configurations.
  
• Technicians must be able to maintain a variety of
  operating systems.
  
• As machines age, some parts become impossible or
  expensive to find.

9
Analysis

• Monthly Payments are not an accurate means of
  economic analysis
  
• Annual worth method proved to be most
  appropriate
  
• Two percent fixed loan compared with lease to buy
  options
  

10
Analysis

• Cash flow diagrams observed
• 2 fixed loan vs lease to buy options
• Annual Worth Analysis done on both scenarios

11
Conclusions
12
Sensitivity Analysis

• Other Fixed Loan options
• Increase Annual Benefit to 240,000
• No Salvage Value

13
Web Resources

• Bankrate www.bankrate.com
• Covers small business, real estate, mortgage,
  insurance, and credit information. Provides
  Finance calculators and investment advice.
  

14
Web Resources

• MSN Money moneycentral.msn.com
• Provides financial information on loans, stocks,
  leasing, and financial investing. Provides great
  variety of information pooled from multiple
  sources. Can forward to mobile devices.