Equipment Lease vs. Buy Calculator
Compare the Real Cost of Ownership
Use our free Equipment Lease vs. Buy Calculator to determine whether leasing or purchasing business equipment is more cost-effective. Compare total costs, monthly payments, tax benefits, and depreciation over time to make an informed decision for your business.
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Loan/Buy Details
Lease Details
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Used for Net Present Value calculations
What This Equipment Lease vs. Buy Calculator Does
Our Equipment Lease vs. Buy Calculator helps businesses make informed decisions about equipment financing by comparing the total cost of ownership for both leasing and purchasing options. The calculator uses sophisticated financial models including loan amortization, depreciation schedules, tax benefits, and net present value (NPV) calculations to provide accurate cost comparisons.
The analysis accounts for factors such as interest rates, tax deductions from depreciation and lease payments, residual values, maintenance costs, and the time value of money to give you a comprehensive view of which option is more financially advantageous for your specific situation.
- •Cash Flow Preservation: Leasing requires less upfront capital, preserving cash for other business needs
- •Technology Protection: Ideal for rapidly advancing technology that may become obsolete
- •Tax Advantages: Lease payments are typically fully tax-deductible as business expenses
- •Flexible Terms: Easier to upgrade equipment or adjust terms as business needs change
- •Off-Balance-Sheet Financing: Leases may not appear as debt on financial statements
- •Long-Term Cost Savings: Generally more cost-effective for equipment with long useful lives
- •Asset Ownership: Build business assets and equity over time
- •Depreciation Benefits: Take advantage of depreciation tax deductions
- •No Usage Restrictions: Complete control over equipment use and modifications
- •Resale Value: Potential to recover some costs through equipment resale
Frequently Asked Questions
Key factors include your business's cash flow situation, tax bracket, equipment usage patterns, technology obsolescence risk, intended duration of use, available financing options, and the equipment's expected resale value. Also consider your company's growth plans and whether the equipment will scale with your needs.
Leasing can be particularly advantageous for small businesses with limited capital, those needing to preserve cash for operations, or companies requiring equipment with short technology cycles. However, small businesses should also consider that long-term leasing may be more expensive than buying, and they won't build equity in the equipment.
Yes, lease payments are typically fully tax-deductible as ordinary business expenses, which can provide immediate tax benefits. When you buy equipment, you can deduct depreciation over several years, which spreads out the tax benefits but may result in larger total deductions over time.
Yes, our calculator includes comprehensive depreciation calculations using straight-line depreciation for purchased equipment, and accounts for all interest costs on loans. It also calculates the tax benefits from both depreciation deductions and lease payment deductions, providing a true apples-to-apples comparison of total costs.
Disclaimer
This calculator provides estimated results for educational purposes only. The calculations are based on the information you provide and standard financial formulas. Actual costs may vary based on specific loan terms, lease agreements, tax situations, and other factors. Consult with your accountant, financial advisor, or equipment financing specialist for personalized advice tailored to your business situation.