Many public works departments delay buying new equipment in order to save enough money to pay cash. Their goal is to save the cost of interest inherent in a lease or other financing mechanism. More and more public works departments are moving away from this strategy as they come to appreciate how much the inflation of equipment impacts the decision. The reality of the situation is that the inflation on the cost of equipment is outpacing the cost of interest in a lease.

To understand this, consider the fact that the purchase price of a new fleet of patrol cars has been increasing over the last number of years due to increasing costs of materials and equipment - we estimate this increase to average about 3% per year. As the following schedule illustrates:

Over a five (5) year period, a $180,000 acquisition

1) Could Inflate by:	$28,669
2) Interest cost would total:	- $22,562
3) The savings attained by leasing now :	$6,107

End Of	The Price w/ 3% inflation will be	Accumulated cost of inflation	Annual cost of interest	Accumulated Cost of Interest	Accumulated Savings
Year 1	$185,400	$5,400	$7,251	$7,251	($1,851)
Year 2	$190,962	$10,962	$6,394	$13,645	($2,683)
Year 3	$196,691	$16,691	$4,737	$18,832	($2,141)
Year 4	$202,591	$22,591	$3,000	$21,832	$759
Year 5	$208,669	$28,669	$1,180	$22,562	$6,107

At breakeven, the benefit of having your equipment now would be enough to justify using a lease now vs. saving to pay cash. Actually saving money should change everyone's strategy.

In summary, it is commendable that the governing bodies of the various departments are doing their best to be conservative with the expenditure of funds. We certainly aren't advocating excessive debt for any department. However, it is imperative to understand how costly it can be to delay when you can enjoy the benefits of immediate use with a lease through Leasing 2.

Give your people the equipment they need!!

Leasing 2, Inc.
Specializing in Tax-Exempt Leases for Public Works Departments
Call Brad Meyers at 800-287-5155 ext. 12