Helps small business owners and entrepreneurs compare the total costs of leasing versus buying equipment. Useful for making informed procurement decisions for machinery, tech, or trade tools. Quickly see which option saves more over your chosen timeframe.
How to Use This Tool
Start by entering the full purchase price of the equipment you’re considering. Select your preferred currency from the dropdown to ensure accurate cost formatting.
Input the lease terms: enter the duration, select whether it’s measured in months or years, and add the monthly lease payment. Fill in optional lease-related costs like down payments, security deposits, and end-of-lease fees if applicable.
Indicate whether the lease includes maintenance: if not, enter the annual maintenance cost for the leased equipment. For owned equipment, enter the expected annual maintenance cost and estimated salvage value at the end of the term.
Click the Calculate button to see a full cost breakdown. Use the Reset button to clear all fields and start a new comparison. You can copy results to your clipboard for records or sharing with your finance team.
Formula and Logic
Total Lease Cost = (Monthly Lease Payment × Term in Months) + Lease Down Payment + Security Deposit + End-of-Lease Fees + (Lease Annual Maintenance × Term in Years)
Total Buy Cost = Equipment Purchase Price + (Owned Equipment Annual Maintenance × Term in Years) - Equipment Salvage Value
Monthly Equivalent Cost = Total Cost / Term in Months
Net Savings = Absolute difference between Total Lease Cost and Total Buy Cost
The tool converts all term inputs to months for consistent monthly equivalent calculations. Salvage value reduces the total cost of buying, as it represents the remaining value of the equipment at the end of the term.
Practical Notes
For small business owners and entrepreneurs, consider these real-world factors when interpreting results:
- Lease payments are often tax-deductible as operating expenses, while depreciation and interest on purchased equipment may offer different tax benefits. Consult your accountant to factor in tax implications.
- Short-term equipment needs (less than 3 years) often favor leasing, as it avoids tying up capital in assets that may become obsolete quickly.
- Long-term use (5+ years) typically makes buying more cost-effective, especially if the equipment retains high salvage value.
- Leases may include upgrade clauses that let you swap equipment for newer models at the end of the term, a key benefit for tech or fast-evolving trade tools.
- Buying equipment can improve your business’s balance sheet by adding assets, which may help with loan applications or investor pitches.
Why This Tool Is Useful
Procurement decisions for equipment can have long-term impacts on cash flow and profitability for small businesses, traders, and e-commerce sellers. This tool eliminates guesswork by quantifying all direct costs of both options in one place.
It helps you avoid hidden costs: many business owners forget to factor in maintenance, deposits, or salvage value when comparing lease and buy quotes. The detailed breakdown highlights these often-overlooked expenses.
The visual comparison bar and monthly equivalent costs make it easy to present findings to stakeholders, from co-founders to financial advisors, without needing complex spreadsheets.
Frequently Asked Questions
Should I include sales tax in the equipment purchase price?
Yes, enter the full out-the-door purchase price including sales tax, delivery fees, and any setup costs. For leases, confirm if quoted monthly payments include tax or if it’s added separately, and adjust inputs accordingly.
What if the lease has an option to buy at the end of the term?
Add the option-to-buy price to the End-of-Lease Fee field. This ensures the total lease cost reflects the full expense if you plan to purchase the equipment after the lease ends.
How do I estimate salvage value for owned equipment?
Check industry benchmarks for your equipment type: for example, heavy machinery may retain 30-50% of its value after 5 years, while tech equipment may retain less than 20%. You can also use online resale platforms to estimate current resale values for similar used equipment.
Additional Guidance
Always get quotes from multiple lease providers and equipment vendors before making a decision. Lease terms can vary widely in fees, maintenance inclusions, and end-of-lease options.
If your business has tight cash flow, leasing may free up working capital for inventory, marketing, or hiring. However, buying builds equity over time, which can be leveraged for future business needs.
Revisit this calculation if your business circumstances change: for example, if you expect higher maintenance costs as equipment ages, or if lease providers offer promotional rates for new customers.