Computer Rental VS Outright Purchase

[howard]

I would like to set up a spreadsheet to determine which is most beneficial-to purchase computers and printers value $ 80,000 or to rent/lease these over a 3 year period.The interest rate is 9% in year 1 with a 2% escalation per annum thereafter

The computers and printers that are purchased for cash can be written off tax purposes immediately in the year of purchase-The downside is that there is a cash outflow of $80000. The tax rate is 28%

It would be appreciated if someone could assist me in determining which is most beneficial.

 

[Weaver]

What are the service agreement terms for the rental?

 

[howard]

It would be a pure rental over 3 years. At this point we would do our own maintenance as we have our own IT Dept?

 

[howard]

I have set up a template for a rental of compters VS outright purchase-see example below

It would be appreciated if someone can check it out and comment as to whether I am on the right track

Purchase VS Rental.Template.xls
	A	B	C	D	E	F
1	CapitalOutlay	80,000
2	Interest	9.00%
3	Term	36
4	Escalation	2.00%
5
6	MonthlyPayment	R2,543.98
7	YearlyPayment	30,527.74
8				Year1	Year2	Year3
9				9.00%	11.00%	13.00%
10		MonthlyPayment	2,543.98	2,543.98	2,619.10	2,773.23
11		YearlyPayment	30,527.74	30,527.74	31,429.17	33,278.72
12		RentalCost3Years	95,235.63
13		CashPrice	80,000.00
14		Savingoutrightpurchase	-15,235.63
15
Sheet1