Lease or buy calculator: equipment and vehicles in present value
Compare leasing with buying in cash or with a loan. See cash paid, the value you keep and a present-value comparison, with an optional simplified tax effect.
A lower monthly lease payment does not mean leasing is cheaper. Buying leaves you with an asset at the end; leasing usually does not. Discounting puts payments at different times on the same footing.
Your assumptions
Buying costs USD 906 less in today’s money, after counting what the asset is worth at the end.
| Measure | Buy | Lease |
|---|---|---|
| Cash paid during the term | USD 45,220 | USD 29,000 |
| Monthly loan payment | USD 846.26 | – |
| Loan balance paid at lease end | USD 9,754 | – |
| Asset value you keep | USD 18,000 | USD 0 |
| Net cost, not discounted | USD 27,220 | USD 29,000 |
| Total cost, present value | USD 26,160 | USD 27,066 |
How the calculation works
PV cost = −Σ CF_t / (1 + d)^t over the lease term; d = (1 + discount rate)^(1/12) − 1; buy CF includes loan payments, any loan payoff and + residual value at the endBoth options are compared over the lease term. Buying: down payment or cash price, monthly loan payments, any loan balance still owed at the end, and the asset’s estimated value at the end as a credit. Leasing: upfront payment, monthly payments and the end payment; if the end payment buys the asset, its value is credited too.
Step by step
- Monthly discount rate d = (1 + annual discount rate)^(1/12) − 1. Use your borrowing rate or the return you could earn elsewhere.
- Buy with a loan: down payment now, installment payments for the lease term, then the remaining loan balance and the residual value at the end. Buy with cash: the price now and the residual value at the end.
- Lease: upfront payment now, monthly payments, the end payment at the end (plus the residual value if it buys the asset).
- Present-value cost = the negative of the sum of discounted cash flows. The option with the lower present-value cost is cheaper under your assumptions.
- Simplified tax effect (optional): lease payments are treated as deductible; buying deducts straight-line depreciation to the residual value plus loan interest, each times your tax rate.
Limitations
Simplified, tax rules vary by country: depreciation periods, deductibility, VAT/GST and lease accounting differ widely. Maintenance, insurance, mileage limits, condition charges and early termination are not included. Residual value is your estimate. Default values are invented examples, not quotes. Illustration, not advice or an offer.
Questions, answered.
Which discount rate should I use?
A common choice is your after-tax cost of borrowing or the return you could earn on the cash. Try several values; the answer can change.
Why does the residual value matter so much?
When you buy, the asset’s value at the end is yours. A higher residual value makes buying cheaper in this comparison.
Is the tax effect accurate for my country?
No. It is a deliberately simple illustration. Ask a tax adviser about depreciation, lease deductibility and VAT where you operate.
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