Lease vs. Buy

Lease vs. Buy

Should you lease or buy? Before making a financial commitment, use this calculator to weigh the pros and cons of each option.

Before deciding if leasing or buying is the best option for you, consider how much money you have available and how quickly the equipment you’re eyeing will become outdated. If it’s equipment that will serve your business well over a long period of time, purchasing could be the right way to go. If it’s something that will get outdated quickly due to new technology, you might want to consider an equipment lease.

Evaluated the amount of money you have for a down payment that could result in a capital reduction. If you don’t have a dedicated savings account for new purchases, a leasing option with lower monthly payments could work out better for your business. Also consult with a tax professional to see if there are tax incentives for leasing or buying so you can understand which option might be more beneficial from a tax perspective.

Leasing can be a popular method for acquiring new equipment for your business. While the monthly payments may seem attractive, it may not always be the best financial decision versus purchasing the equipment and securing financing with a low interest loan.


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Buy Option:

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Lease Option:

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Results

Buy Payment

Net Cost of Buying

Lease Payment

Net Cost of Lease

Understanding Your Results

Before exploring this calculator familiarize yourself with some of the terms and definitions that are used in this financial tool.

Buy Payment: The monthly payment amount when you are purchasing equipment.
Down Payment: Amount paid as a down payment, which for leases is often called a capital reduction. The bigger the down payment, the better chance you have at getting a lower interest rate on your loan.
Expenses: Money that a business spends. Many businesses have a variety of one-time expenses, such as purchasing equipment, and ongoing expenses, like utility payments or rent.
Interest: The cost of borrowing money. Businesses may have to pay interest on a loan or line of credit.
Lease Payment: The amount of money for the monthly payment to lease equipment.
Net Cost of Buying: This is the total cost of buying your equipment.
Net Cost of Lease: This is the total cost of leasing your equipment.
Operating Expenses: The ongoing costs of running a business. Operating expenses could include salaries, rent and utilities.
Equipment Purchase Price: Total purchase price after any manufacturer’s rebate.
Residual Percent: For leases, this is the remaining value after the lease term expires. The higher this amount, the lower your lease payment will be.
Sales Tax Rate: Percentage sales tax to be charged on this purchase. Sales tax is included in each lease payment. Sales tax for buying is charged on the total sale amount.
Security Deposit: A refundable security deposit is required at the time of lease. Make sure the security deposit will be fully refunded when the lease ends.

Note: This site provides general information related to creating and running a business. The content of this site is for informational purposes only and not for the purpose of providing legal or tax advice or opinions. The contents of this site, and the viewing of the information on this site, should not be construed as, and should not be relied upon for, legal or tax advice in any particular circumstance or fact situation. No action should be taken in reliance on the information contained on this site, and Visa Inc. disclaims all liability in respect to actions taken or not taken based on any or all of the contents of this site to the fullest extent permitted by law. You should contact an attorney to obtain advice with respect to any particular legal or tax issue or problem, including those relating to your current or potential business.

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