I am trying to do an analysis using NPV to determine whether to buy or lease.

First what exactly is the discount rate? Would it be, if I took the money today and invested it, the return I would get?

Here is my buy information (no financing):

Purchase price: $198,000

With a shipping cost of: $10,512.14

And a monthly service fee of: $3,306.06

Discount rate of: 2.5%

Returns: Year 1 – 2%, Year 2 – 5%, Years 3-6 – 6%

What would my NPV be?

I am getting ($281,099.57)

To Lease the information is:

Monthly Lease price: $3,860.55

Monthly service fee: $3,306.06

And a shipping cost of: $10,506.45

Same discount rate and Returns

What is this NPV?

Here I am getting: ($207,325.75)

I keep getting negative NPV’s

If that is correct does that mean, if negative to consider leasing?

And if I take the difference between the Buy and Lease NPV’s less the Purchase price, would that give me a price to consider buying?

($281,099.57)-($207,325.75)= ($73,773.82)

$198,000-$73,773.82= $124,226.18 – if this price to consider purchasing?

Also, what is the IRR?

Thank you for your help