Equipment ROI & Lease vs Buy Calculator
Compare net present value (NPV), after-tax cash flows, depreciation shields, and breakeven costs of leasing vs purchasing commercial business equipment.
Asset Horizon & Tax Assumptions
Option A: Purchase & Loan Financing
Option B: Commercial Operating Lease
Strategic Decision Considerations
Beyond discounted cash flow, consider technological obsolescence and working capital liquidity. If equipment technology evolves rapidly (e.g. IT servers or diagnostic medical devices), leasing transfers obsolescence risk to the lessor and keeps bank credit lines open for operational growth.
About this tool
How to use it
- Enter the equipment purchase price, intended usage horizon in years, and estimated salvage resale value at the end of the term.
- Input your loan financing assumptions (down payment %, interest rate APR, and annual maintenance) under Option A.
- Input your commercial operating lease terms (monthly rental payment, upfront security deposit, and maintenance coverage) under Option B.
- Click 'Compare Lease vs Buy' to review the Net Present Value (NPV) decision, cumulative cash outflow, and tax shield deductions.
Why it matters
Business owners often compare monthly lease payments directly to monthly loan payments, ignoring the time value of money, corporate depreciation tax shields, and salvage equity recovery. Calculating true discounted cash flows ensures companies make capital allocation decisions that preserve liquidity and maximize shareholder value.
When to use it
Use this calculator before signing commercial fleet vehicle leases, when acquiring industrial CNC or manufacturing machinery, when provisioning enterprise IT servers, or when preparing capital expenditure proposals for your board or CFO.
Good to know
Calculations use a standard discounted cash flow (DCF) model discounting after-tax operational cash flows at your business weighted average cost of capital (WACC). Straight-line depreciation is modeled across the asset horizon. Tax regulations vary by jurisdiction; consult your certified corporate CPA regarding Section 179 or bonus depreciation allowances.
Common questions
Why is Net Present Value (NPV) better than comparing monthly payments?
A dollar spent five years from now is worth less than a dollar spent today due to inflation and capital opportunity cost. NPV discounts all future cash flows—including loan repayments, tax shields, maintenance, and resale value—back to today's present value, giving an exact financial apples-to-apples comparison.
What is an equipment depreciation tax shield?
When a business buys capital equipment, tax authorities allow the cost to be depreciated over its useful life. Each year's depreciation deduction reduces taxable profit, creating an annual tax savings (the tax shield) equal to the depreciation expense multiplied by your corporate marginal tax rate.
Are commercial lease payments 100% tax deductible?
Yes. For true operating leases, monthly lease payments are categorized as operating expenses (OpEx) and are fully deductible in the tax year they are paid, directly lowering corporate tax obligations.
When does leasing make more sense than buying?
Leasing is advantageous when equipment has high technological obsolescence (such as IT servers or medical tech), when upfront capital must be preserved for working inventory, or when commercial lease terms include expensive maintenance and servicing.
What role does salvage value play in the decision?
When purchasing, your business retains full ownership and can sell the asset at the end of its useful term. Even modest salvage values (e.g. 15% to 20% of original purchase price) frequently tip the financial balance in favor of buying over long horizons.