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Lease vs Buy Equipment Calculator

Work out lease vs buy equipment instantly with clear inputs, formula shown and shareable results.

About Lease vs Buy Equipment Calculator

Lease versus buy is a discounting question: compare the purchase price paid today with the present value of the lease payment stream at your cost of capital. Only if the present values are close do the softer factors — obsolescence risk, covenant headroom, balance sheet treatment — decide it.

Formulas

Present value of lease

PV = sum of Annual payment / (1 + r)^t for t = 1..n

Decision rule

Buy if PV(lease) > Purchase price; lease if lower

Worked example

With the default values below, Lease vs Buy Equipment Calculator returns Present value of lease payments of $147,806.75. Change any input above and every figure here is recalculated in your browser.

Inputs used

Purchase price
180,000
Annual lease payment
38,000
Termmaximum 100 years
5 years
Discount rate
9

Results

Present value of lease payments
$147,806.75
Outright purchase cost
$180,000.00
Present-value advantage
$32,193.25
Recommendation
Leasing is cheaper in present-value terms

Step by step

  1. 1Values used
  2. 2Present value of lease
  3. 3Decision rule
  4. 4Present value of lease payments= 147,806.75
  5. 5Outright purchase cost= 180,000.00
  6. 6Present-value advantage= 32,193.25
  7. 7Recommendation= Leasing is cheaper in present-value terms

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Should residual value be included?

Yes if you will own an asset with real resale value at the end. Subtract the discounted residual from the purchase cost.

What discount rate should I use?

Your marginal borrowing rate is the usual choice, because leasing is a financing decision rather than an investment decision.

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