SCENARIO: $50,000 equipment purchase for Arbor Services company
Ted's Tree Service is considering a fleet of two more trucks and extra tree-cutting equipment to expand their business into a neighboring county. The total equipment cost is $50,000. Paying cash would nearly empty their working capital so they are considering leasing the equipment to help manage cash flow.
At a bare minimum, Ted's Tree Service expects 3 jobs a month @ $2,500 a job with his new fleet.
Let's take a look at what the true cost to Ted's Tree Service would be:
Cost Analysis
| Equipment Cost |
$ 50,000 |
| Monthly Lease Payment** |
1,050 |
| Tax Deduction*** |
(420) |
| Net Cost per Month |
$ 630 |
Operating Figures After Tax Savings
| Net Cost Per Day (22 work days/month) |
$ 29 |
| Net Cost Per Hour (8 work hours/day) $ 4 |
$ 4 |
Return on Investment (ROI)
| Equipment Cost |
$ 50,000 |
| Monthly Lease Payment |
$ 1,050 |
| Monthly Revenue Increase |
$ 7,500 |
| Improved Cash Flow |
$ 6,450 |
| ROI |
614% |
ASSUMPTIONS
| * |
All payments are subject to credit approval and may change without notice. Products range from $1 purchase option to FMV. |
| ** |
Monthly lease payment based on highest credit grade program on 60 month term. |
| *** |
Federal plus state tax rate at 40%. Consult a tax advisor. |
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