Total Cost Purchase Options Buy vs Lease vs Rental Conversion Cash Flow Analysis

by David L. Wickness, Caterpillar Tractor Co, Peoria, IL, USA,



Document Type: Proceeding Paper

Part of: Effects of Deterioration on Safety and Reliability of Structures

Abstract:

Today's financing alternatives are very complex and sometimes difficult to comprehend. The combined effect of the slow economy and uncertain future workload has accelerated the need for financing methods other than a straight cash transaction. The challenge to both salesmen and customers to understand issues of leasing and rental conversion alternatives has increased significantly. As the name implies, the total cost purchase options considers the total costs involved in acquiring the use of equipment under three different acquisition methods: buy; lease; and rental conversion. The value of this analysis is to sort the complex issues of financing and compare them to something the customer can relate to - CASHFLOW and PROFIT. This sales tool, when used with other sales tools - specifically the Equipment Investment Analysis (EIA) - provides a comprehensive owning and operating cost picture.

Subject Headings: Construction equipment | Financial management | Financing | Construction costs | Benefit cost ratios | Value engineering | Construction methods

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