How the comparison works
The calculator compares buying equipment with a loan against leasing it, over the lease term and without discounting. Buying costs the down payment, fees and loan payments, plus whatever you still owe when the lease would end, less what the equipment is then worth. A lease you return costs its payments and fees. A lease you buy out also costs the buyout price and leaves you owning the equipment, so its end value offsets the cost on both sides.
The result is the difference in net cost, which cheaper option wins, the average cost per month and the end value at which the two cost the same. Prices and payments are used as quoted, with no sales tax added to either side.
Worked example: $75,000 of equipment over a 36-month lease
Buy with a 10% down payment and an 8.5% loan over 60 months, and the payment is $1,384.87 a month. After 36 months you have paid $57,355.17 in cash and still owe $30,466.29. Leasing the same equipment for $1,650 a month costs $59,400.00 over 36 months and you return it.
If the equipment would sell for $30,000 and your tax rate is 21%, buying has a net cost of $45,678.96 after $12,142.51 of tax relief, or $1,268.86 a month. Leasing has a net cost of $46,926.00 after $12,474.00 of relief, or $1,303.50 a month. Buying costs less by $1,247.04.
The break-even end value is $28,421.46. If the equipment would fetch more than that, buying costs less. With no tax rate entered, buying costs less by $1,578.54. If it were worth nothing, leasing would cost less by $22,452.96.
Loan term and lease term
The loan can run longer than the lease. Here the loan lasts 60 months and the comparison stops at 36, so the balance is assumed to be paid off then. With a 36-month loan the payment is $2,130.81, nothing is owed at the end, and buying costs less by $4,100.80.
$1 buyout and fair-market-value leases
A $1 buyout lease is effectively a purchase, so the comparison ignores tax and keeps the equipment's end value on both sides. At $2,300 a month, you pay $82,800.00 for the lease and $1.00 for the buyout, a net cost of $52,801.00, and leasing costs less by $5,020.46.
With a $1,900 payment and an $18,000 buyout at the end, the lease has a net cost of $56,400.00. Leasing costs less by $1,421.46.
How the tax estimate works
The tax estimate treats lease payments as a business expense, which is the usual treatment of an operating lease. For buying, it relieves the cost of owning: the price less the end value, plus loan interest and fees. It assumes you sell the equipment at the end value, so the deductions you claimed are partly recovered. IRS Publication 544 covers this depreciation recapture on sale.
The estimate ignores timing, so it does not value Section 179 or bonus depreciation, which bring the deduction forward. Treat it as a planning figure and ask your tax adviser. For a lease you buy out, the tax treatment depends on the agreement, so the estimate is switched off.
What this calculator leaves out
It does not discount cash flows, add sales tax, include maintenance, insurance or end-of-lease fees, or model variable rates and stepped payments. It does not compare other uses of your cash. For a single loan or lease, use the dedicated pages.
To model one purchase in detail, use the equipment loan calculator.
To work out a lease payment, use the equipment lease calculator.
Use the right country page
This page uses US terms and US dollars. The country choices above the inputs open separate pages. Choosing United Kingdom opens the UK version, which covers hire purchase and finance leases.
For a UK business, use the UK equipment loan vs lease calculator.
Inputs for the US equipment loan vs lease calculator
At the end of the lease
Return the equipment, or buy it at a set price or for $1.
Equipment price
The cash price before sales tax.
Down payment on the loan
Percent of the price paid in cash. The rest is borrowed.
Loan interest rate
The yearly rate, charged monthly.
Loan term
Months to repay the loan in level payments.
Loan fees
Fees paid at the start of the loan.
Lease term
Months of lease payments. The comparison runs this long.
Lease payment each month
From the lease quote, before sales tax.
Lease fees
Fees and non-refundable charges paid at the start.
Buyout price
Used only when you buy the equipment at the end.
Value of the equipment at the end
Your estimate of its sale price. It cannot exceed the price.
Your income tax rate
For the tax estimate. Enter zero for a pre-tax comparison.
CALCULATOR QUESTIONS
US equipment loan vs lease calculator questions
Is it cheaper to lease or buy equipment?
It depends on what the equipment is worth at the end. In the worked example the break-even end value is $28,421.46. Above that, buying costs less.
What is a $1 buyout lease?
A lease where you can buy the equipment for $1 at the end. It is effectively a loan, so the calculator keeps the equipment's end value on both sides and skips the tax estimate.
Does this calculator include sales tax?
No. Enter prices and payments as quoted. Sales tax can differ between a purchase and a lease, so adjust your inputs if it applies.
How does the end value affect the result?
The higher the end value, the more buying costs less. If the equipment were worth nothing, leasing would cost less by $22,452.96 in the worked example.
Does the calculator discount future payments?
No. It adds up cash paid and subtracts the end value, so a later payment counts the same as an earlier one. A higher loan rate or a higher discount rate would favour leasing.