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Equipment loan vs lease calculator
Compare the net cost of financing a purchase with a loan against a true lease, over the lease term. You supply the resale value you expect and your combined tax rate; we do the math.
What this comparison assumes
- You compare over the lease term. If the loan is longer, the remaining loan balance is paid off at the end from the sale of the equipment.
- Buying: you sell the equipment at the end for the resale value you enter. That value is your estimate, not data.
- Leasing: a true lease that you return at the end. A $1 buyout or other nominal purchase option is usually treated as a purchase, so use the loan calculator for that.
- Taxes: the whole purchase price and the loan interest are assumed to be deducted by the end of the period (for example through Section 179, bonus depreciation or regular depreciation), and the resale proceeds are taxed at the same rate. Lease payments are assumed to be fully deductible as rent.
- No discounting: dollars are added at face value. Deducting a purchase in year one can be worth more than this shows, because the tax savings arrive earlier.
Reading the result
The "before tax" row is the plain cash comparison. The "after estimated tax" row applies your tax rate to deductions and to the resale gain. Small differences are within the noise of your own estimates, so test a lower and a higher resale value. Selling equipment you already deducted can create taxable gain; see IRS Publication 544.
Worked example
On the default inputs ($100,000 equipment, $10,000 down, 8.5% loan over 60 months against a 60-month lease at 9% with a 15% residual, $25,000 resale value and a 30% tax rate), the loan payment is $1,846.49 and the lease payment is $1,862.99. Before tax, buying nets out to $95,789 and leasing to $111,779. These are illustrations, not market data.
- IRS: Is it a deductible lease payment or a depreciable purchase? (Income & Expenses 7)
- IRS Publication 946 (2025): How To Depreciate Property
- IRS Publication 544: Sales and Other Dispositions of Assets
Common questions
Is it better to lease or buy equipment?
It depends on how long you will use it, what it will be worth later, the rate you can get and your tax situation. This calculator shows the cash and estimated after-tax cost of each path so you can compare them with your own numbers.
Why does the tax rate matter?
Deductions are worth more to a business with a higher tax rate. Enter your combined federal and state rate. If you are unsure, ask your tax professional.