Lease vs. Buy Calculator
Compare the financial impact of leasing versus buying equipment or vehicles.
Why Lease vs. Buy Analysis Matters
The decision to lease or buy equipment, vehicles, or property has significant financial implications. This calculator helps you compare the total cost of ownership for both options, considering financing costs, tax benefits, and residual values to determine the most cost-effective choice for your situation.
How to Use This Calculator
- Asset Cost: Total purchase price if buying
- Lease Term: Duration of lease agreement
- Monthly Lease Payment: Fixed lease payment amount
- Residual Value: Optional buyout amount at lease end
- Down Payment: Initial payment if purchasing
- Loan Term: Duration of financing if buying
- Interest Rate: APR on purchase financing
- Tax Rate: Your marginal tax rate for deduction calculations
- Enter any format — we extract numbers from text, symbols, and units
Key Formulas Used
Loan Payment = (Loan Amount × Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^-Term)Net Lease Cost = Total Lease Payments - (Total Lease Payments × Tax Rate)Net Purchase Cost = Asset Cost + Total Interest - (Interest + Depreciation) × Tax Rate - Residual ValueWhen Leasing Makes Sense
- ✅ You need the latest equipment/technology regularly
- ✅ Cash flow is more important than ownership
- ✅ Tax benefits are greater with operating leases
- ✅ Maintenance is included in lease terms
- ✅ You don't want disposal/resale hassles
When Buying Makes Sense
- ✅ You'll use the asset beyond the lease term
- ✅ You can take advantage of capital allowances/depreciation
- ✅ The asset holds value well (low depreciation)
- ✅ You want to build equity in the asset
- ✅ Interest rates are favorable compared to lease factors
Tax Considerations
| Option | Tax Treatment | Benefit |
|---|---|---|
| Lease | Lease payments typically fully deductible as operating expense | Immediate tax savings on entire payment |
| Buy (Loan) | Interest deductible; depreciation claimed over time | Longer-term tax benefits from depreciation |
| Buy (Cash) | Depreciation claimed over time; possible Section 179 deduction | Potential for accelerated depreciation |
Industry Benchmarks
| Asset Type | Typical Lease Term | Common Buy Decision Factors |
|---|---|---|
| Vehicles | 24–48 months | Mileage, customization needs, long-term use |
| Equipment | 36–60 months | Technology lifecycle, maintenance costs |
| Real Estate | 5–10 years | Location stability, appreciation potential |
| Technology | 12–36 months | Upgrade cycles, software compatibility |
Financial Metrics to Consider
- Net Present Value (NPV): Compare discounted cash flows
- Internal Rate of Return (IRR): Effective cost of each option
- Cash Flow Impact: Monthly payment differences
- Balance Sheet Effect: How each affects your financial statements
- Opportunity Cost: Alternative uses for capital
Free Financial Planning Tools: Budget, Invest & Plan Retirement
Free Financial Planning Tools – Try Now
Explore All Calculators→