Buy vs lease equipment
A low monthly payment can hide a higher total cost, and buying needs a lot of money up front. Compare both options over the same period, with the value you get back at the end and the cost of your money.
Buy or lease equipment? How to compare them properly
Enter the years of use, the cost of your money, the price and resale value if you buy, and the upfront payment, monthly payment and maintenance if you lease. The calculator compares the total cost of each option in today's money and the cash you need up front.
Example: buying a machine costs 12,000 and you expect to sell it for 3,000 after 3 years; leasing it costs 300 a month. Undiscounted, buying costs 9,000 and leasing 10,800. With a 5% cost of money, 9,408 against 10,026: buying is 618 cheaper. But if you only got 1,500 when selling, buying would cost 10,704 and be more expensive.
How it is calculated
- Buy: price up front + maintenance − what you get back by selling at the end (residual value).
- Lease: upfront payment + monthly payments + maintenance, if not included in the payment.
- Present value: each payment is discounted at the rate you enter, because paying today is not the same as paying in three years.
Assumptions
- No taxes or tax relief, which depend on the country and the deal.
- You estimate the residual value: try a lower one too.
- The discount rate can be your cost of borrowing or the return you require on your money.
Frequently asked questions
Is it better to buy or lease equipment?
It depends on the price, the value you get back at the end, maintenance and the cost of your money. Compare both options over the same period with all their payments, not just the monthly payment.
What is residual value?
What you would get by selling the equipment at the end of the period. It weighs heavily on the result: try a lower figure too, because it is an estimate.
Why discount the payments?
Because paying 12,000 today is not the same as paying 300 a month for three years: you could use that money or it costs you to borrow it. Present value puts every payment in today's money.
What cost of money should I use?
The interest rate you borrow at or the return you require on your money. If you enter 0, you compare just the sum of payments.
Does it include taxes?
No. The tax treatment of buying and leasing depends on the country and the deal: check with your accountant, as it can change the result.