1. What is Lease vs Buy Calculation?

The Lease vs Buy calculation helps compare the total costs of leasing an asset versus purchasing it outright. This financial analysis is crucial for making informed decisions about equipment, vehicles, or property acquisitions.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• \( \text{total payments} \) — Sum of all lease payments
• \( U \) — Upfront costs of purchase
• \( LI \) — Lost interest on invested capital
• \( O \) — Outstanding loan balance (if any)
• \( M \) — Market value of asset at end of period

Explanation: The calculation compares the total lease payments against the net cost of purchasing, considering all associated costs and residual value.

3. Importance of Lease vs Buy Analysis

Details: This analysis helps businesses and individuals make financially sound decisions about asset acquisition, considering cash flow, tax implications, and total cost of ownership.

4. Using the Calculator

Tips: Enter all costs in dollars. For accurate comparison, use the same time period for both lease and purchase calculations. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When is leasing better than buying?
A: Leasing may be preferable when you want to preserve capital, need frequent upgrades, or can deduct lease payments as business expenses.

Q2: What's included in upfront costs?
A: Down payment, taxes, registration fees, and any other immediate costs associated with the purchase.

Q3: How to calculate lost interest?
A: Estimate what you would have earned if the purchase money was invested instead (use expected rate of return × purchase price).

Q4: What if there's no outstanding loan?
A: Simply enter 0 for the outstanding loan amount if you're paying cash for the purchase.

Q5: How to determine market value?
A: Research the expected resale value of the asset at the end of your comparison period (same duration as lease term).