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Lease vs Loan Equipment Calculator

Enter the lease and loan terms to compare total equipment cost.

How it is calculated

The tool totals the cash paid on each route and compares the totals. lease total = monthly lease × lease months + buyout and loan total = down payment + monthly loan payment × loan months. The buyout is the price paid at the end of the lease to keep the equipment, so it counts on the lease side. The difference is then reported as "Leasing is cheaper by …" or "Loan/buy is cheaper by …", or as equal. Amounts are shown in dollars and terms are in months; the buyout is optional and treated as 0 when empty, but the down payment must be filled in (enter 0 if there is none). Lease, loan and term values must be above zero, and the down payment and buyout cannot be negative. The comparison is on plain totals: no interest rate, tax effect, discounting, resale value of owned equipment or maintenance cost is included.

Worked example

A lease costs 1200 a month for 48 months and ends with a 5000 buyout. A loan needs 6000 down and 1450 a month for 48 months. Lease total = 1200 × 48 + 5000 = 57,600 + 5000 = $62,600.00. Loan total = 6000 + 1450 × 48 = 6000 + 69,600 = $75,600.00. The tool reports: Leasing is cheaper by $13,000.00. That gap is not a verdict: with the loan you own the equipment from the start, so its resale value should be weighed against the $13,000.00.

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Common mistakes

  • Treating the lower total as the winner without counting ownership. A loan ends with equipment you own, so compare the gap with the equipment's likely resale value.
  • Leaving the buyout empty for a lease that lets you keep the equipment at the end. Without it the lease total is understated; enter the purchase price in the buyout field.
  • Entering the loan principal as the monthly payment. The loan field is the payment you make each month; use a loan calculator first if you only know the amount borrowed.
  • Comparing terms of different lengths without noticing it. A 36-month lease against a 60-month loan covers different time spans, so the totals are not like for like.
  • Leaving out the down payment or upfront lease fees. Both change the cash totals and can reverse the result, and an empty down payment field gives no result at all.

About this calculator

Businesses acquiring costly equipment — construction machinery, medical devices, manufacturing lines — typically choose between an operating lease (pay to use the equipment for a term, then return or buy it out at a residual value) and a loan (finance the purchase with a down payment, then own it outright once repaid). This calculator totals each path’s true cost: the loan side sums the down payment plus all loan payments, while the lease side sums the lease payments plus any end-of-term buyout, so you compare like with like.

Business owners and CFOs run this comparison because the cheaper option depends heavily on specifics that a simple monthly-payment comparison misses — a lease’s lower payments can be offset by a large buyout, while a loan’s higher payments build equity in an asset that has resale value when the term ends. This is standard practice in equipment procurement and capital budgeting, where the total-cost comparison (not just cash flow timing) drives the buy-versus-lease decision.

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Comments (1)

  • Editorial team

    The comparison is only fair when both paths cover the same horizon. With the defaults, 36 months each, leasing costs 16,200.00 against 20,000.00 for the loan, but a 5,000 buyout flips it to 21,200.00 against 20,000.00. Stretch the loan to 60 months and it jumps to 32,000.00, which says little because you would own the equipment longer. The totals ignore resale value, interest on cash and tax. What terms are you being offered?

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