How the math works
How to use it
- Use the same term for both paths. A 36-month lease against a 60-month loan is not a comparison, and quoting them that way is how a lease is made to look cheap.
- The discount rate is what your cash would otherwise earn. It is why a dollar paid in month 50 costs less than a dollar paid today, and leaving it out is what makes a raw sum of payments misleading.
- Be deliberate about the resale value. It is the most uncertain input and it decides the answer, so run it at a pessimistic figure as well as a hopeful one.
- Then read the breakeven resale line. It converts the whole thing into one question you can actually have an opinion about: will this be worth more or less than that number when the term ends?
A worked example
A $60,000 machine with 7% sales tax, $6,000 down, $500 of fees, financed over 60 months at 8.5%, expected to be worth $18,000 at the end. Against a lease at $950 a month with $2,500 due at signing and a $1,000 refundable deposit, over the same 60 months, with cash otherwise earning 5%.
The loan payment is $1,194. In today’s money buying costs $55,748 and leasing costs $53,062, so leasing is $2,687 cheaper. But the whole thing turns on resale: buying wins if the machine is worth more than $21,448 at the end. You assumed $18,000. If you think it holds value better than that, buy.
Where this sits in the Financial Literacy resource
A calculator tells you where you are. It does not tell you what to do next, and a number without a plan behind it tends to produce anxiety rather than progress. These stages are free, need no account, and cover the decision this calculator is measuring.
Common questions
Why compare in today’s money instead of total payments?
Because a dollar you pay in year five is not the same as a dollar you pay today, and the two paths pay out on very different schedules. Buying takes a large amount on day one; leasing spreads it. Adding up raw payments ignores that entirely and systematically favors whichever option front-loads less.
Why is tax not included?
Because getting it wrong is expensive and the rules move. Lease payments are generally deductible as paid; a purchase is capitalized and depreciated, and Section 179 or bonus depreciation can pull that forward. How much any of it is worth depends on your profit that year. Purdy Powers folds a depreciation figure straight into its answer; we would rather show you the cash comparison and send you to IRS Publication 946 and a CPA for the rest.
What is the breakeven resale value?
The resale figure at which leasing and buying cost exactly the same. Above it, buying is cheaper; below it, leasing is. It is useful because you probably cannot say what a machine will be worth in five years, but you can usually say whether it will be worth more or less than a specific number.
Does leasing preserve cash?
Usually yes on day one, which is the real argument for it in a business that is short of working capital. Whether that is worth the extra cost depends on what else the cash would be doing — which is what the discount rate on this page is asking you.
What about maintenance and end-of-lease charges?
Not modeled here, and both can be significant. Leases commonly carry wear-and-tear or excess-use charges, and an owned machine carries its own maintenance once any warranty ends. If either is material for your equipment, add it into the payment fields as a monthly figure.
What this calculator is not
It is an educational model, not a projection and certainly not advice. It knows nothing about your income, your state, your debts or your benefits status, and it ignores taxes and fees unless the page says otherwise. If you receive SSI or SSDI some of this math works differently and getting it wrong can cost you eligibility — start with the Disability Wealth Guide instead. Our sourcing and correction policy is on the editorial standards page.
Nothing here is stored. Every calculation runs in your browser. No numbers are transmitted, logged or saved to any server, and no account is required. Close the tab and it is gone.