Lease vs Buy Calculator

How to Use This Lease vs Buy Calculator

This calculator helps you determine whether leasing or buying an asset, such as a car, equipment, a building, or machinery, is more cost-effective. It considers various factors such as:

• Asset cost
• Depreciation method
• Financing and interest
• Tax implications
• Residual value

Here’s a step-by-step method to use the lease vs buy calculator:

Step 1: Enter Basic Asset Info

🔹 Asset Type

• Just for reference (e.g., Car, Equipment, Building)

🔹 currency

• Select your preferred currency (e.g., INR, USD, EUR)

🔹 Asset Cost

• The total price or value of the asset you’re considering.
• Example: 500000 for a ₹500,000 car or machine

🔹 Residual Value

• The estimated value of the asset at the end of its useful life.
• Helps calculate depreciation and net cost
• Leave blank if unsure — optional

Step 2: Define Useful Life / Lease Term

🔹 Useful Life / Lease Term (years)

• Choose how long you’ll keep or lease the asset. This is the length of the lease
• For buying, this is the depreciation period

Step 3: Input Lease Details

🔹 Monthly Lease Payment

• If you’re considering it, enter your estimated monthly payment
• Example: 10000 for ₹10,000/month

Step 4: Input Buy Details

🔹 Annual Interest Rate (%)

• The rate charged by your lender if you finance the purchase
• Example: 8.5 For 8.5% annual interest

Step 5: Choose Depreciation Method

Select one of the following depreciation methods depending on your accounting needs:

Note: Some methods require additional inputs (see below)

Step 6: Provide Additional Inputs (if needed)

Depending on the depreciation method selected, some fields appear automatically:

🔹 Annual Units Produced

• Used only with the Units of Production method
• Example: 1000 units per year

🔹 Total Estimated Units

• Total production capacity over the asset’s life
• Example: 10000 total units

Step 7: Add Tax Information

These fields help calculate after-tax costs, which can significantly impact your decision.

🔹 Tax Rate (%)

• Your effective tax rate (used to calculate after-tax benefits)
• Example: 25 for 25%

🔹 Deductible Lease Portion (%)

• Percentage of lease payments that are tax-deductible
• Example: 100 iIffully deductible

Step 8: Click “Calculate”

Once all required fields are filled in:

• Click the Calculate button
• You’ll see a detailed comparison of:
  • Total Lease Cost
  • Total Buy Cost
  • After-Tax Lease Cost
  • After-Tax Buy Cost
  • Final Recommendation (Lease vs Buy)

Step 9: Understand the Results

The results section shows:

• Total Lease Cost: Monthly lease × term
• Total Buy Cost: Loan payments over the term
• After-Tax Lease Cost: Net lease cost after tax deductions
• After-Tax Buy Cost: The buy cost after the depreciation tax benefit
• Difference (Lease – Buy): Positive means lease is more expensive; negative means buy is more expensive

Step 10: View Recommendation

Based on your inputs, the tool gives a suggestion:

• ✅ Buying is better if the after-tax buy cost is lower; leasing is better if the after-tax lease cost is lower
• ⚖️ Equal cost if both options are similar

Step 11: Reset the Form

If you want to try different values:

• Click the Reset button
• All fields will be cleared
• You can start fresh

Tips for Best Use of the Lease vs Buy Calculator

• Try multiple depreciation methods to see how they affect your buy cost
• Compare high vs low interest rates
• Test different tax rates to understand after-tax savings
• Use real-world data from your business or personal finances

Who Should Use This Lease Vs Buy Calculator?

• Business owner leasing vs purchasing assets
• Financial planners advising clients
• Individuals evaluating car leases vs purchases
• Accountants calculating tax-efficient depreciation