Lease vs. Buy Calculator
Perform professional capital budgeting. Compare equipment lease agreements against amortized loans on a Net Present Value (NPV) basis.
NPV Outflow Savings: $2,626
Equipment Lease Details
Purchase Loan Parameters
Corporate tax & Depreciation Specs
The optimal strategy is to BUY, saving you $2,626 in present value cash.
| Month | Lease Flow | Lease Discounted | Buy Flow | Buy Discounted | Net Lease Advantage |
|---|---|---|---|---|---|
| Month 0 | -$2,441 | -$2,441 | -$5,600 | -$5,600 | $3,159 |
| Month 1 | -$1,046 | -$1,039 | -$1,159 | -$1,152 | $114 |
| Month 2 | -$1,046 | -$1,032 | -$1,161 | -$1,145 | $115 |
| Month 3 | -$1,046 | -$1,025 | -$1,162 | -$1,139 | $116 |
| Month 4 | -$1,046 | -$1,018 | -$1,164 | -$1,133 | $118 |
| Month 5 | -$1,046 | -$1,012 | -$1,165 | -$1,127 | $119 |
| Month 6 | -$1,046 | -$1,005 | -$1,166 | -$1,121 | $121 |
| Month 7 | -$1,046 | -$998 | -$1,168 | -$1,115 | $122 |
| Month 8 | -$1,046 | -$992 | -$1,169 | -$1,109 | $123 |
| Month 9 | -$1,046 | -$985 | -$1,171 | -$1,103 | $125 |
| Month 10 | -$1,046 | -$979 | -$1,172 | -$1,097 | $126 |
| Month 11 | -$1,046 | -$972 | -$1,174 | -$1,091 | $128 |
| Month 12 | -$1,046 | -$966 | -$1,175 | -$1,085 | $129 |
| Month 13 | -$1,046 | -$959 | -$1,176 | -$1,079 | $131 |
| Month 14 | -$1,046 | -$953 | -$1,178 | -$1,073 | $132 |
| Month 15 | -$1,046 | -$947 | -$1,179 | -$1,068 | $134 |
| Month 16 | -$1,046 | -$940 | -$1,181 | -$1,062 | $135 |
| Month 17 | -$1,046 | -$934 | -$1,182 | -$1,056 | $137 |
| Month 18 | -$1,046 | -$928 | -$1,184 | -$1,050 | $138 |
| Month 19 | -$1,046 | -$922 | -$1,185 | -$1,045 | $140 |
| Month 20 | -$1,046 | -$916 | -$1,187 | -$1,039 | $141 |
| Month 21 | -$1,046 | -$910 | -$1,189 | -$1,034 | $143 |
| Month 22 | -$1,046 | -$904 | -$1,190 | -$1,028 | $144 |
| Month 23 | -$1,046 | -$898 | -$1,192 | -$1,023 | $146 |
| Month 24 | -$1,046 | -$892 | -$1,193 | -$1,017 | $147 |
| Month 25 | -$1,046 | -$886 | -$1,195 | -$1,012 | $149 |
| Month 26 | -$1,046 | -$880 | -$1,196 | -$1,007 | $151 |
| Month 27 | -$1,046 | -$874 | -$1,198 | -$1,001 | $152 |
| Month 28 | -$1,046 | -$868 | -$1,200 | -$996 | $154 |
| Month 29 | -$1,046 | -$863 | -$1,201 | -$991 | $155 |
| Month 30 | -$1,046 | -$857 | -$1,203 | -$985 | $157 |
| Month 31 | -$1,046 | -$851 | -$1,204 | -$980 | $159 |
| Month 32 | -$1,046 | -$846 | -$1,206 | -$975 | $160 |
| Month 33 | -$1,046 | -$840 | -$1,208 | -$970 | $162 |
| Month 34 | -$1,046 | -$834 | -$1,209 | -$965 | $164 |
| Month 35 | -$1,046 | -$829 | -$1,211 | -$960 | $165 |
| Month 36 | -$6,500 | -$5,117 | $6,287 | $4,950 | -$12,787 |
Capital Budgeting: Lease vs. Buy Analysis
When acquiring corporate assets like machinery, computing hardware, or vehicle fleets, finance executives perform a lease-versus-buy assessment. The goal is to minimize the Net Present Value (NPV) of cash outflows over the asset's useful life.
The NPV Comparison Method
Because cash outflows occur at different points in time, we discount all monthly cash flows using the firm's Weighted Average Cost of Capital (WACC):
Whichever strategy has a less negative NPV (closer to zero cost) represents the more financially optimal choice.
The Role of Corporate Tax Shields
Tax deductions differ significantly between options:
- Lease Tax Shields: Under operating leases, the entire monthly lease payment is tax-deductible as a business expense.
- Buy Tax Shields: When buying, the company owns the asset. As a result, they can deduct interest expenses on the loan and straight-line depreciation of the asset cost over its useful tax life.
Can this compare leasing vs purchasing with NPV?
Yes. The calculator simulates both leasing and purchasing scenarios side-by-side, modeling standard vs itemized corporate tax shields, loan interest amortization, and depreciation to yield a clear Net Present Value (NPV) advantage.