Equipment: buy or lease: How we calculate
Compare buying equipment or a vehicle with your own funds against leasing: return or buyout, upfront and annual costs.
How we calculate
We compare a cash purchase with a fixed monthly lease payment over the same term. The payment already includes interest, so it is never added again. Monthly payments are discounted at the effective monthly rate (1+annual rate/100)^(1/12)−1; annual related costs (insurance, maintenance, taxes, other) are discounted at year-end. The purchase price and purchase one-time costs fall at the start; the lease’s nonrefundable down payment and contract fee also fall at the start. Choose an end scenario: “Return” (default — only a return charge applies, no resale credit) or “Buyout” (you pay the buyout price and own the asset — the same expected resale value is then deducted, just as for a purchase). Enter every figure on the same VAT basis; the purchase is not loan-financed. If a payment already bundles a service, leave the matching extra field at zero. The resale value is an estimated asset value at the horizon, not a guaranteed sale. The discount rate reflects the opportunity cost of your capital, not the lease’s own interest rate. Results show both the nominal (undiscounted) and present-cost totals for buying and leasing, plus their difference: a positive difference means leasing is cheaper in present-cost terms, a negative one means buying is cheaper.
What the figures mean
- Valuing future money today
A future amount is reduced using the chosen required return to compare it with money today. This is discounting, not a shop discount or solely an inflation adjustment.
Simple example: €110 in one year at a 10% rate corresponds to €100 today.
Worked example
These illustrative inputs let you check the method. They are not figures for a real company or automatically current tax rates.
Inputs
- Purchase price
- 18,000
- Monthly lease payment
- 450
- Asset value at the end of the term
- 4,000
- Years
- 5
- Discount rate (%)
- 6
- Return charges
- 0
- Purchase registration, delivery and one-off taxes
- 0
- Purchase annual insurance
- 0
- Purchase annual maintenance
- 0
- Purchase annual taxes
- 0
- Purchase other annual costs
- 0
- Down payment
- 0
- Contract fee
- 0
- Lease one-time registration or tax
- 0
- Lease annual insurance
- 0
- Lease annual maintenance
- 0
- Lease annual taxes
- 0
- Lease other annual costs
- 0
- End mode
- Return
Results
- Buy less lease (present cost)
- -8,354.7524
- Buy · present cost
- 15,010.9673
- Lease · present cost
- 23,365.7197
Change assumptions in the calculator and compare outcomes. Money follows your input unit; figures from different periods need adjustment before comparison.
Enter every amount on the same VAT basis; the purchase price is not financed with a loan. The resale value is an estimate, not a guaranteed sale price. If a payment already includes a service (such as maintenance), leave that extra field at zero.