Lease vs Buy Equipment Calculator
NPV analysis, tax benefits (Section 179, bonus depreciation 2026), depreciation methods, and cash flow comparison for business equipment.
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Section 179 (up to $1.2M) and 60% bonus depreciation in 2026 reduce buy cost significantly. Lower discount rate favors buying; higher rate favors leasing. Maintenance included in lease can offset higher lease payments.
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Why: Lease vs buy affects cash flow, taxes, and flexibility. NPV compares total cost in today's dollars. Tax benefits (Section 179, bonus depreciation) often make buying attractive for profitable businesses.
How: NPV = Σ(CF_t / (1+r)^t). After-tax cost = Total − (Deductions × Tax rate). Section 179: up to $1.2M. Bonus depreciation: 60% of remaining basis in 2026.
Run the calculator when you are ready.
🎯 Sample Scenarios — Click to Load
Equipment Information
Lease Terms
Purchase Terms
Maintenance & Tax
Cash Flow Over Time
Cumulative cash flow comparison
Total Cost (NPV) Comparison
Purchase Cost Breakdown
📐 Calculation Breakdown
For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
💡 Money Facts
Section 179: up to $1.2M first-year deduction in 2026.
Bonus depreciation: 60% of remaining basis in 2026.
NPV compares total cost in today's dollars.
Tax benefits often make buying more attractive for profitable businesses.
📋 Key Takeaways
- • NPV comparison—Compare lease vs buy using net present value to account for the time value of money.
- • Tax benefits matter—Lease payments are deductible; purchase offers depreciation (Section 179, bonus, MACRS) and interest deductions.
- • 2026 limits: Section 179 up to $1.2M; bonus depreciation 60%; phase-out begins at $2.5M total purchases.
- • Lease when cash flow is tight or tech changes fast; buy when you can maximize tax benefits and want ownership.
💡 Did You Know?
📖 How It Works
This calculator compares the net present value (NPV) of leasing versus purchasing equipment. NPV discounts future cash flows to today's dollars so you can compare options fairly. Lease payments are typically deductible as business expenses; purchase offers depreciation deductions (Section 179, bonus, or MACRS) plus interest deductions on the loan.
Lease Cash Flows
Monthly payments (minus tax benefit) + security deposit + buy option if exercised. All lease payments are deductible.
Purchase Cash Flows
Down payment + loan payments (minus interest tax benefit) + maintenance (minus tax benefit) − depreciation tax benefit − residual value at end.
NPV Formula
NPV = Σ CF_t / (1 + r)^t
Where CF_t is cash flow at period t and r is the monthly discount rate (annual rate ÷ 12).
🎯 Expert Tips
📋 Maximize Section 179
If equipment qualifies and you have taxable income, Section 179 can provide immediate full deduction—often making purchase more attractive than lease.
🔄 Run Sensitivity on Discount Rate
Higher discount rates favor leasing (lower upfront); lower rates favor purchase. Test 4%, 6%, 8% to see how your cost of capital affects the outcome.
⚙️ Include All Fees
Security deposits, buy options, maintenance (if not in lease), and residual value can swing the comparison—don't omit them.
📊 Consider Non-Financial Factors
Technology obsolescence, flexibility to upgrade, balance sheet impact, and maintenance responsibility may outweigh small NPV differences.
⚖️ Comparison Table
| Factor | Lease | Purchase |
|---|---|---|
| Upfront Cost | Low (deposit + first payment) | High (down payment) |
| Tax Deductions | Lease payments | Depreciation + interest |
| Ownership | No | Yes |
| Maintenance | Often included | Your responsibility |
| End of Term | Return or buy option | Own asset, residual value |
❓ Frequently Asked Questions
What is NPV and why use it for lease vs buy?
Net Present Value (NPV) converts future cash flows to today's dollars using a discount rate. It lets you compare lease (spread over time) vs purchase (upfront + loan) fairly, since a dollar today is worth more than a dollar later.
What is Section 179 and who qualifies?
Section 179 lets businesses deduct the full cost of qualifying equipment in year one, up to $1.2M (2026). Phase-out begins at $2.5M in total purchases. Must be used for business >50% of the time.
What is bonus depreciation?
Bonus depreciation allows an extra first-year deduction. For 2026 it's 60% of the cost (phasing down from 100%). Can combine with Section 179: use 179 first, then bonus on remaining basis.
When does leasing make more sense?
Leasing often wins when: cash flow is tight, equipment tech changes rapidly, you want flexibility to upgrade, or you can't fully use depreciation benefits (e.g., startup losses).
When does purchasing make more sense?
Purchase often wins when: you have capital, equipment has long useful life, you can maximize Section 179/bonus, or you want to build equity and capture residual value.
How does the discount rate affect the result?
Higher discount rates favor leasing (future costs are discounted more heavily). Lower rates favor purchase (you're effectively valuing future cash flows more). Use your cost of capital or opportunity cost.
What depreciation method should I choose?
Section 179 for qualifying equipment if you have taxable income. Bonus for new/used qualifying property. MACRS-5 for computers/vehicles; MACRS-7 for office furniture. Straight-line for simplicity.
Does maintenance matter?
Yes. If maintenance is included in the lease, you avoid repair costs. If you purchase, add annual maintenance and its tax benefit to the model. This can shift the outcome.
📊 Lease vs Buy by the Numbers
📚 Official Sources
⚠️ Disclaimer: This calculator provides estimates only. Actual lease vs buy outcomes depend on your tax situation, financing terms, and equipment specifics. Tax laws change; consult a CPA or tax advisor for your situation. We are not tax or financial advisors.
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