Should we finance this equipment or lease it?
Put a finance agreement quote and a lease quote for the same equipment side by side: the total you pay, a yearly rate for each, and the cost once you count what the equipment is still worth at the end.
With an equipment finance agreement or an equipment loan you make a down payment and monthly payments, and the equipment is yours. A lease with a $1 buyout works the same way in the end: you keep the equipment for a nominal sum. With a fair market value lease you rent the equipment: the lessor owns it, and at the end you hand it back, renew, or buy it at what it is then worth.
So the monthly payments alone do not tell you which costs less. When you finance, you end up owning something that is still worth money. With a fair market value lease you do not. This calculator counts that, using your own estimate of what the equipment will be worth when the agreement ends.
It also works out a yearly rate for each quote, the way the federal Truth in Lending rules (Regulation Z) work out an APR: an APR for the finance agreement, and the rate built into the lease when the equipment you hand back is counted as part of what you pay.
Results
| Item | Finance agreement | Lease |
|---|---|---|
| Paid at the start | $5,350 | $2,650 |
| Total you pay | $57,550 | $41,750 |
| At the end | You own it ($15,000) | You hand it back |
| Net cost | $42,550 | $41,750 |
Counting what the asset is worth at the end, the lease costs $800 less over the agreement. The result changes with your estimate of the end value, and it leaves out sales tax, tax deductions and the timing of payments. It is a way to compare quotes, not a provider's offer.
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Worked example: A $50,000 machine over 3 years
A made-up example, not a quote from any lender or lessor. All figures are before sales tax. The machine is expected to be worth $15,000 after 3 years. The lease takes the first and last month's rentals at the start.
- Price of the asset
- $50,000
- Finance agreement: $5,000 down payment, 36 × $1,450, fees
- $57,550
- Finance agreement APR
- 10.44%
- Less the asset you keep, worth
- $15,000
- Finance agreement net cost
- $42,550
- Lease: 2 + 34 rentals of $1,150, fees
- $41,750
- Lease rate built in
- 7.22%
- Lease net cost (you hand it back)
- $41,750
The lease's monthly payments are lower, but under the finance agreement you keep an asset worth $15,000. Counting that, the lease costs $800 less. With a different end value the answer can change.
Worth knowing
- For a $1 buyout lease, enter it as a finance agreement: the rentals as monthly payments, any paid at the start as the down payment, and $1 as the fee at the end.
- Tax treatment differs. If you own the equipment, you can usually depreciate it, and section 179 lets you deduct the cost of qualifying equipment in the year you start using it: up to $2,560,000 for tax years beginning in 2026, reduced once the equipment you put into service in the year costs more than $4,090,000. If you lease, you generally cannot depreciate the equipment, because you do not own it. The calculator leaves tax out; ask your tax preparer how each works for your business.
- Sales tax on equipment and on lease rentals depends on the state, and the figures here leave it out.
- The value at the end is your estimate, and it decides a lot. Try a lower figure to see how the result changes.
- Under a fair market value lease you may also pay for wear and tear, extra use or return shipping when you hand the equipment back. Ask for those terms in writing.
Routes this works for
Sources
- IRS Publication 946: How To Depreciate Property (section 179 limits for 2026; property you own, and leased property) · checked October 21, 2026
- OCC Comptroller's Handbook: Lease Financing (version 2.0): the dollar-out lease and residual value · checked October 21, 2026
- 12 CFR 1026, Appendix J (Regulation Z): annual percentage rate computations for closed-end credit · checked October 20, 2026
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