ART - Lease vs Buy Analysis 2008

The document is a report on a comparison analysis of leasing versus buying school buses for the Culpeper County School system in Virginia. The school system currently has a student body of 7,787 and provides transportation for approximately 4,900 students. The report highlights the importance of safety and cost in providing school buses and states that the Culpeper County Administrator requested a study on the options of leasing school buses. The background section provides information on the current school bus inventory, which consists of 94 buses ranging from model years 1991 to 2007, with an additional 5 new buses projected to be added each year. The recommended life cycle for school buses is 12 years according to the state, but the Culpeper County Schools recommend a 16-17 year life cycle. The repair cost for all 94 buses over the past 17 years is $684,412. The report then discusses the leasing option for acquiring school buses. It explains that leasing finance programs can provide affordable terms and specific budget incentives for schools. Leasing programs can be designed to meet the school's specific needs, including long or short-term leasing programs. The report outlines the options available at the end of a lease, such as returning the bus, re-leasing the remaining balance, paying off the remaining balance, or returning the bus. The report also compares leasing to buying. It explains that with leasing, the school does not own the bus and must return it at the end of the lease unless they choose to buy it. Up-front costs for leasing may include the first month's payment, a security deposit, and other fees, while buying requires a cash price or down payment. Monthly lease payments are usually lower than loan payments, and early termination charges apply for leasing, while the school is responsible for any pay-off amount if a loan is terminated early. Other factors discussed include bus return and liquidation, future value, mileage limitations, and excess wear. The report concludes that leasing is an alternate means of financing school buses at a reasonable cost and low interest rate. It allows schools to retain ownership and make fixed payments during the contract period. Leasing can be attractive for schools with budgetary constraints, allowing them to obtain more buses with a smaller investment. It also allows for cash conservation and financial planning, freeing up capital for other purposes.