Equipment Lease vs Buy Calculator
Deciding whether to lease or buy a piece of equipment comes down to a fair comparison of two cost streams that arrive at different times. Buying costs the full purchase price today. Leasing spreads the cost into annual payments, so to compare the two you have to bring the lease payments back to today's dollars by discounting them at your cost of capital. This calculator does that discounting and reports the present value of each option plus the difference, so you can see which is cheaper in present-value terms. A higher discount rate makes future lease payments look smaller today and tilts the result toward leasing, which is why the rate is left fully editable for you to match your own borrowing cost or required return. The present-value of cost is the core comparison, but tax treatment, maintenance, obsolescence risk, the residual value if you own the asset and balance-sheet effects all matter too, and a small gap can be outweighed by them. Use this tool for the financial baseline, then layer those factors on top. Every figure is computed deterministically from the formula shown below, with a worked example that reconciles exactly to the calculator defaults so you can trust the comparison before you commit capital.
Compare costs in today's dollars: buy = price now; lease = sum of payment / (1 + r)^t. A $50,000.00 purchase versus $12,000.00 a year for 5 years at 6% has a lease present value of $50,548.37, so buying is cheaper by $548.37.
Lease vs buy formula
Cost to buy = Purchase price (today)
Cost to lease = sum from t=1 to n of Payment / (1 + r)^t
r = discount rate per year (as a decimal)
t = year, n = lease term in years
The purchase happens now so it is not discounted. Each lease payment is discounted back to today and summed. The option with the lower present value of cost is cheaper.
Worked example
Buy for 50,000 today, or lease for 12,000 a year for 5 years at a 6% discount rate.
- Year 1: 12,000 / 1.06 = 11,320.75
- Year 2: 12,000 / 1.06^2 = 10,679.96
- Year 3: 12,000 / 1.06^3 = 10,075.43
- Year 4: 12,000 / 1.06^4 = 9,505.12
- Year 5: 12,000 / 1.06^5 = 8,967.10
- Lease present value = 50,548.37; buying = 50,000.00; buying is cheaper by 548.37
Buying saves 548.37 dollars in present-value terms. These are the calculator's default inputs, so the result above matches the widget exactly.
How the discount rate shifts the result
A higher discount rate lowers the present value of the lease, favoring leasing.
| Discount rate | Lease present value | Cheaper option |
|---|---|---|
| 4% | $53,421.87 | Buy |
| 6% | $50,548.37 | Buy |
| 8% | $47,912.52 | Lease |
| 10% | $45,489.44 | Lease |
Leasing, borrowing and consumer money basics: US Consumer Financial Protection Bureau (CFPB).
Equipment lease vs buy calculator: frequently asked questions
How do I compare leasing and buying equipment?
Put both options in today's dollars. Buying costs the purchase price now. Leasing costs a stream of future payments, so you discount each one back to the present at your cost of capital and add them up. Whichever has the lower present value of cost is cheaper in present-value terms. This calculator does the discounting for you and reports the difference.
Why discount the lease payments?
A dollar paid in three years costs less than a dollar paid today, because you could invest today's dollar in the meantime. Discounting converts the spread-out lease payments into a single comparable figure in today's money, so the comparison against the upfront purchase price is fair. The discount rate is your cost of capital or required return.
What discount rate should I use?
Use your cost of capital, which for a small business is often the rate on borrowing of similar term, or your required rate of return. A higher discount rate makes future lease payments look cheaper in present-value terms and tilts the comparison toward leasing. This tool leaves the rate fully editable.
What else matters beyond present value?
Present value of cost is the core financial comparison, but also weigh tax treatment, who bears maintenance and obsolescence, the residual value if you buy, balance-sheet effects, and whether you want to own the asset at the end. A small present-value gap can be outweighed by these factors, so treat the number as one important input among several.
What is the lease vs buy formula?
Cost of buying equals the purchase price today. Cost of leasing equals the sum of each lease payment divided by (1 plus the discount rate) raised to the power of its period. Compare the two present values; the lower one is cheaper.
Official sources
- Leasing, borrowing and consumer money basics: US Consumer Financial Protection Bureau (CFPB). As at 25 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 25 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.