Business Equipment Lease Calculator
Lease vs buy is a critical decision. Calculate the true cost of equipment leasing with tax implications and opportunity cost analysis.
How the Business Equipment Lease Calculator works
Compare lease terms, purchase price, interest rates, tax benefits, and residual values. Calculate total costs, present values, and cash flow impacts to determine the optimal financing choice.
Equipment leasing can preserve capital but costs more long-term. This calculator reveals the true economics, helping you make the right financing decision.
How it works
Tutorial
Equipment financing decisions impact cash flow, tax deductions, and balance sheet strength. Comparing lease vs. purchase requires analyzing total costs, tax implications, residual value, and opportunity cost of capital to make the optimal choice.
You have two options: use the calculator above for comprehensive lease-buy comparison, or follow this guide to manually analyze equipment financing options.
The Formula
| Option | Total Cost Formula |
|---|---|
| Purchase | Price + Interest – Tax Savings – Residual Value |
| Lease | (Monthly Payment × Months) – Tax Savings |
| Cost Difference | Lease Total Cost – Purchase Total Cost |
Step-by-Step Calculation
Let’s compare leasing vs. buying $100,000 equipment.
Step 1: Calculate Purchase Option Total Cost
Determine all-in cost to buy the equipment:
| Purchase Component | Amount |
|---|---|
| Equipment Price | $100,000 |
| Down Payment (20%) | $20,000 |
| Loan Interest (5 years @ 6%) | $13,200 |
| Tax Savings (30% bracket) | -$33,960 |
| Residual Value (after 5 years) | -$30,000 |
| Net Purchase Cost | $49,240 |
Calculation: $100,000 + $13,200 – $33,960 – $30,000 = $49,240
Step 2: Calculate Lease Option Total Cost
Determine all-in cost to lease the equipment:
| Lease Component | Amount |
|---|---|
| Monthly Lease Payment | $2,100 |
| Lease Term | 60 months |
| Total Lease Payments | $126,000 |
| Tax Savings (30% bracket) | -$37,800 |
| Residual/Buyout Option | $0 |
| Net Lease Cost | $88,200 |
Calculation: ($2,100 × 60) – $37,800 = $88,200
Step 3: Compare Options
Determine which option costs less:
| Comparison | Calculation | Result |
|---|---|---|
| Purchase Net Cost | From Step 1 | $49,240 |
| Lease Net Cost | From Step 2 | $88,200 |
| Difference | $88,200 – $49,240 | $38,960 |
Final Answer: Purchasing saves $38,960 over leasing
What This Means
While purchasing costs less long-term, leasing preserves $80,000 in working capital upfront and may make sense if cash is tight or equipment becomes obsolete quickly. The right choice depends on your cash position and strategic needs.
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