Lease vs Buy Calculator
Compare equipment leasing versus buying with side-by-side ROI analysis, cash flow impact, and total cost comparison. Get instant recommendations to make the best financing decision for your business.
Common Lease vs Buy Scenarios
See real comparisons between leasing and buying equipment across different industries. These examples show typical scenarios and which option typically provides better value.
| Equipment Type | Equipment Cost | Loan Payment | Lease Payment | Recommendation | Savings |
|---|---|---|---|---|---|
Small Business IT Setup Computers, servers, networking equipment | $25,000 | 12% • 4yr $658/mo | 3.0% • 3yr $750/mo | Lease | $2,280 |
Medical Practice Equipment X-ray machines, diagnostic equipment | $100,000 | 10% • 7yr $1661/mo | 2.5% • 5yr $2500/mo | Loan | $18,540 |
Manufacturing Machinery CNC machines, automated production lines | $200,000 | 9% • 7yr $3217/mo | 2.2% • 5yr $4400/mo | Loan | $28,980 |
Restaurant Equipment Commercial kitchen, POS systems, seating | $75,000 | 11% • 5yr $1636/mo | 3.5% • 3yr $2625/mo | Loan | $15,540 |
When to Buy (Loan)
Consider buying equipment when:
- Long-term use: Equipment will be used for 5+ years
- Slow depreciation: Equipment holds value well over time
- Ownership benefits: Need to modify or customize equipment
- Strong cash flow: Can afford higher monthly payments
When to Lease
Consider leasing equipment when:
- Technology equipment: Computers, software, communication systems
- Preserve cash flow: Need lower monthly payments
- Tax advantages: 100% deductible lease payments
- Upgrade flexibility: Want latest equipment every few years
Lease vs Buy Comparison
Compare equipment financing options side-by-side to make the best decision.
Loan Options
Lease Options
Decision Framework
Key factors to consider when choosing between leasing and buying equipment.
Choose Buying When:
- ✓ You plan to keep equipment long-term (5+ years)
- ✓ Equipment has strong resale value
- ✓ You want to build business equity
- ✓ Depreciation tax benefits are important
- ✓ You have sufficient down payment capital
- ✓ Total cost savings matter most
Choose Leasing When:
- ✓ You need to preserve working capital
- ✓ Equipment becomes obsolete quickly
- ✓ Lower monthly payments are critical
- ✓ You want newer equipment regularly
- ✓ Maintenance is included in lease
- ✓ Off-balance-sheet financing preferred
Common Scenarios
Growing Business
Need equipment but cash flow is tight. Want to preserve capital for growth opportunities.
Established Company
Strong cash position, looking for long-term asset ownership and maximum ROI.
Technology Equipment
Equipment becomes obsolete quickly. Need latest technology and easy upgrades.
Tax Considerations
Equipment Purchase Tax Benefits
- Section 179 Deduction: Deduct full equipment cost in year of purchase (up to $1.16M in 2024)
- Bonus Depreciation: 100% first-year depreciation for qualifying equipment
- MACRS Depreciation: Spread depreciation over equipment's useful life
Equipment Lease Tax Benefits
- Operating Expense: Lease payments are fully deductible as business expense
- Off-Balance Sheet: Operating leases don't appear as debt on balance sheet
- Immediate Deduction: Start deducting payments immediately, no depreciation schedule
Important: Tax laws are complex and change frequently. Always consult with a qualified tax professional to understand how equipment financing decisions will impact your specific tax situation.
Cash Flow Impact
Equipment Purchase Impact
Equipment Lease Impact
Frequently Asked Questions
Which option is typically cheaper overall?
Buying is usually cheaper in total cost if you keep the equipment for its full useful life. However, leasing can be more cost-effective if you upgrade equipment frequently or need to preserve working capital.
How do tax benefits compare between leasing and buying?
Both offer tax benefits, but differently. Purchases allow depreciation deductions and potential Section 179/bonus depreciation. Leases provide immediate expense deductions. The best choice depends on your tax situation and timing needs.
What about equipment that becomes obsolete quickly?
For technology and equipment that becomes obsolete quickly (computers, medical equipment, some manufacturing tools), leasing often makes more sense as it provides easier upgrade paths and reduces obsolescence risk.
Can I switch from lease to purchase during the term?
Many leases include early purchase options, but terms vary. You'll typically pay remaining lease payments plus the residual value, minus any early purchase discounts. Review your lease agreement for specific terms.
In-Depth Guide: Lease vs Buy
Learn when to lease, when to buy, and how to evaluate the trade-offs beyond monthly payment.
Decision Factors
- Equipment lifecycle and obsolescence risk
- Cash flow constraints vs total cost optimization
- Tax treatment (e.g., Section 179, bonus depreciation) and timing of deductions
Modeling Tips
- Model multiple rate/term scenarios to see sensitivity
- Include maintenance and downtime in ROI modeling
- Review residual assumptions carefully in leases
When Each Wins
- Buying: long-term, high-resale, low obsolescence equipment
- Leasing: fast-changing technology, cash preservation needs
- Mixed: buy core assets, lease short-life peripherals