Buy vs Lease Equipment Calculator

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

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

$
$
months
yrs
%
$

Lease Net Cost

$39,168.00

Buy Net Cost

$30,600.00

Better Option

Buy

Save $8,568.00

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
Resale Value at End of Term-$5,000.00
Deductions Net of Recapture (price less resale)$45,000.00
Tax Savings-$14,400.00
Net Cost After Tax$30,600.00
First-year tax saving, straight-line over 7 years$2,285.71
First-year tax saving, Section 179 or bonus depreciation$16,000.00

Section 179 or 100% bonus depreciation moves the deduction into the first year, which helps cash flow, but it does not change the total: selling the equipment later taxes back the deductions taken above its resale value. Figures are not discounted and leave out financing, interest and maintenance.

Break-Even

Break-Even Point38 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 what you could sell the equipment for when the lease would have ended, less the tax saved on that difference. However you depreciate it, straight-line, MACRS, bonus or Section 179, the deductions taken above the resale value are taxed back as ordinary income when you sell (IRC §1245), and a sale below the remaining basis is a deductible loss, so the net deduction is the price minus the resale value. The useful life only sets the first-year deduction shown for straight-line, beside full expensing in year one. 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%, resale value $5,000 when the 48 months are up.
  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: you pay $50,000 and sell the equipment for $5,000 at the end of the term. The deductions net of what the sale recaptures come to $50,000 − $5,000 = $45,000, which saves $45,000 × 32% = $14,400. Net cost after tax: $50,000 − $5,000 − $14,400 = $30,600. Expensing the whole price under Section 179 saves $16,000 in the first year instead of $2,285.71 with straight-line over 7 years, but the total is the same once the sale is taxed.
  4. 4 Buying comes out $8,568 cheaper. The break-even is 38 months: $30,600 ÷ ($1,200 × 68%) = 37.5, so a lease running longer than about three years costs more than buying. The figures are not discounted and leave out financing and maintenance.

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