Buy vs Lease Equipment Calculator

Compare buying vs leasing business equipment. See tax benefits, total cost, and which is better.

By Konstantin Iakovlev · Updated September 2026 · Source: IRS — Publication 946, How To Depreciate Property

$
$
months
yrs
%
$

Lease Net Cost

$39,168.00

Buy Net Cost

$36,771.43

Better Option

Buy

Save $2,396.57

Lease Analysis

Total Lease Payments$57,600.00
Tax Deduction (100% of payments)$57,600.00
Tax Savings$18,432.00
Net Cost After Tax$39,168.00

Buy Analysis

Purchase Price$50,000.00
Depreciation Tax Savings$8,228.57
Salvage / Resale Value$5,000.00
Net Cost After Tax$36,771.43
With Section 179 (Year 1 Expense)$29,000.00
Sec 179 Tax Savings$16,000.00

Break-Even

Break-Even Point45 months

Use the Buy vs Lease Equipment Calculator above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

The Buy vs Lease Equipment Calculator helps businesses determine the most cost-effective way to acquire necessary equipment by comparing total ownership costs against leasing expenses. The decision can significantly impact cash flow and tax planning.

The calculator compares after-tax costs over the lease term, without discounting them to present value. Leasing costs the monthly payment times the number of months, less the tax saved by deducting every payment at your tax bracket. Buying costs the purchase price, less the tax saved on straight-line depreciation ((cost − salvage value) ÷ useful life) for the years the lease would have run, less the salvage value you enter. A second buy figure assumes the whole price is expensed in the first year under Section 179. There are no inputs for financing, interest, maintenance or a discount rate, so weigh those separately.

Consider the equipment's useful life beyond the lease term, as purchasing may be more advantageous for long-term use equipment. Don't forget to include maintenance costs, insurance, and potential obsolescence risks in your analysis. Many businesses overlook the opportunity cost of the down payment when purchasing, which could be invested elsewhere for returns.

Example: $50,000 of Equipment, Bought or Leased at $1,200 a Month for 48 Months

  1. 1 Input: equipment cost $50,000, lease payment $1,200 a month for 48 months, useful life 7 years, tax bracket 32%, salvage value $5,000.
  2. 2 Lease: $1,200 × 48 = $57,600 of payments, all deductible, which saves $57,600 × 32% = $18,432 in tax. Net cost after tax: $39,168.
  3. 3 Buy: straight-line depreciation is ($50,000 − $5,000) ÷ 7 = $6,428.57 a year, or $25,714.29 over the 4-year lease term, which saves $8,228.57 in tax. Net cost after tax: $50,000 − $8,228.57 − $5,000 salvage = $36,771.43. Expensing the whole $50,000 under Section 179 instead saves $16,000 and brings the net cost to $29,000.
  4. 4 Buying comes out $2,396.57 cheaper. The break-even is 45 months: $36,771.43 ÷ ($1,200 × 68%) = 45.06, so after-tax lease payments overtake the cost of buying only near the end of the 48-month term. The figures are not discounted and leave out financing and maintenance, which can tip a result this close either way.

Source: IRS — Publication 946, How To Depreciate Property · Last updated: September 2026

Frequently Asked Questions

Is it better to buy or lease business equipment?
Buy if you want to own the asset long-term, the equipment has a long useful life, or you can take advantage of Section 179 or bonus depreciation. Lease if you need to preserve cash, the equipment becomes obsolete quickly, or you want predictable monthly expenses.
Can I deduct leased equipment payments?
Yes. Lease payments are generally 100% deductible as a business expense in the year paid. Purchased equipment is deducted through depreciation, Section 179, or bonus depreciation. Leasing spreads the deduction over the lease term; buying can front-load it.
What is an equipment lease buyout?
At the end of a lease, you may have the option to purchase the equipment at fair market value or a predetermined price ($1 buyout leases). A $1 buyout lease is essentially a financing arrangement and may be treated as a purchase for tax purposes.

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