Equipment Lease vs Buy Calculator
Compare leasing vs buying equipment
Enter purchase price, salvage value, useful life, lease terms, and financing rate to compare the total cost of owning versus leasing equipment over the same period.
Lease versus buy: how to make the right equipment decision
Whether to lease or buy business equipment is one of the most common financial decisions facing small and medium-sized businesses. The right answer depends on your cash position, tax situation, how quickly the technology evolves, and whether you want to own the asset at the end of the period. This calculator gives you a clear total cost comparison so you can make an informed decision rather than relying on rules of thumb.
When you buy equipment outright or finance the purchase with a loan, you pay for the full cost of the asset over time. At the end, you own the equipment and can sell it for its residual value. The net cost of ownership is the purchase price plus financing interest plus maintenance, minus what you receive when you eventually sell or trade in the asset. Buying makes sense when you expect to use the asset for a long time, plan to modify it, or want to build equity in it.
When you lease, you pay for the use of the equipment rather than ownership. Monthly lease payments are typically lower than loan payments because you are only financing the depreciation during the lease period, not the full asset value. At the end of the lease, you return the equipment (or buy it for the residual value). Leasing makes sense when you need access to the latest technology, want predictable monthly costs, or prefer to preserve capital for other investments.
Tax considerations for leasing versus buying
Both lease payments and depreciation on owned assets are tax-deductible, but in different ways. Lease payments are deducted as operating expenses in the period they are paid. Ownership provides depreciation deductions spread over the asset's useful life, or potentially immediate deduction through Section 179 or bonus depreciation rules in the US. Your tax situation, expected income levels, and timing of deductions all affect which option is more tax-efficient. Consult a tax adviser before making large equipment decisions.
What about off-balance-sheet treatment of leases?
Under current accounting standards (ASC 842 in the US and IFRS 16 internationally), most leases are now recognised on the balance sheet as right-of-use assets and lease liabilities, reducing the traditional accounting advantage of leasing. However, operational leases may still be treated differently from finance leases for some purposes. Check with your accountant if balance sheet presentation matters for your business's credit agreements or investor reporting.
When is leasing clearly better?
Leasing is particularly attractive for technology and equipment that becomes obsolete quickly, where owning for the full useful life is risky. It is also preferable when your business is in a growth phase and needs to conserve capital. If a lessor includes maintenance in the lease agreement, you also transfer the risk of unexpected repair costs. For construction, medical, and tech equipment, leasing is very common for these reasons.
