Equipment Buy vs. Lease Calculator
Should your business buy equipment with a loan or lease it? Compare the net cost of each over the same period, counting residual value.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Equipment price
- $60,000
- Down payment (to buy)
- $6,000
- Loan rate (to buy)
- 8%
- Loan term (years)
- 5
- Monthly lease payment
- $1,100
- Comparison period (years)
- 4
- Equipment value at end (% of price)
- 30%
by $343 after residual value
- Buy — net cost$53,143
- Lease — total cost$52,800
- Residual equity if buying$5,413
How the cheaper over 4 years changes with equipment price
Holding the other inputs at the example above, here is how the result moves as equipment price changes.
| Equipment price | Cheaper over 4 years | Buy — net cost |
|---|---|---|
| $30,000 | Buying | $25,953 |
| $45,000 | Buying | $39,548 |
| $60,000 | Leasing | $53,143 |
| $90,000 | Leasing | $80,334 |
| $120,000 | Leasing | $107,525 |
The math behind it
The calculator prices out both paths over the same period. To buy, it finances the price minus your down payment, amortizes the loan, and adds up the payments made during the comparison window; it then credits you the equipment's residual value less any loan balance still owed — that equity offsets the cost. Net buy cost is your down payment plus payments made, minus that end equity. To lease, it simply multiplies the monthly lease payment by the number of months. Whichever net figure is lower wins.
Assumptions & limits
- Buying credits you the equipment's residual value at the end; that value is your input as a percent of the original price.
- The comparison period can be shorter than the loan term, in which case the remaining loan balance is netted against residual value as leftover equity.
- The lease is treated as a straight operating lease — total cost is just payments made, with no purchase option or residual to you at the end.
- Tax effects are not modeled. Section 179 or bonus depreciation on a purchase, and the deductibility of lease payments, can change the real answer.
- Maintenance, insurance, and obsolescence risk are not priced in, though they often favor leasing for fast-aging equipment.
Common questions
Why does buying often look cheaper even with a down payment?
Because buying builds an asset you keep. The calculator credits the equipment's residual value back to you at the end, offsetting much of what you paid. Leasing has no such credit — every payment is gone. When equipment holds its value well, that residual tips the math toward buying; when it depreciates fast, leasing closes the gap.
When does leasing make more sense than buying?
Leasing tends to win when equipment becomes obsolete quickly (technology, medical devices), when you want predictable payments and easy upgrades, or when you would rather preserve cash and borrowing capacity for other needs. It also sidesteps the risk of being stuck with an asset worth less than you hoped at the end.
How do taxes affect the buy-versus-lease decision?
Significantly, and this calculator leaves them out on purpose. Buying may let you deduct the cost quickly through Section 179 expensing or bonus depreciation, while lease payments are generally deductible as an operating expense as you pay them. The timing and size of those deductions can flip the decision, so confirm the tax treatment with your accountant.
What is residual value and why does it matter so much?
Residual value is what the equipment is worth at the end of the comparison period. In a purchase, it is equity you own; the higher it is, the cheaper buying looks after the offset. Because it is an estimate, the buy-versus-lease result is sensitive to it — a conservative residual makes leasing more competitive.