Problem:
Hanna-Charles Company needs to add a new fleet of vehicles for their sales force. The purchasing manager has been working with a local car dealership to get the best value for the company dollar. After some negotiations, a local dealer has offered Hanna-Charles two options:
1) a three year lease on the fleet of cars or
2) 15% off the top to purchase outright.
Would cost Hanna-Charles company about 5% less than the lease option in terms of present value.
a. What are the advantages and disadvantages of leasing?
b. Which option should the purchasing manager at Hanna-Charles pursue and why?