Equipment lease or buy calculator
Short answer
For $80,000 of equipment, compare a 60-month loan at 13.00% with a $1,850 lease. Cheaper at today's value: Buying, by $6,380. Both are discounted at the loan rate. SBA's term limit is in SOP 50 10 8.1, App. 17, Para. A.2.
If you buy
If you lease
You own the equipment at the end either way, so its resale value does not change this result.
Estimates only. This is not a quote or tax advice. Your lender and your lease set the real terms. The loan rate starts at SBA's maximum for the size until you change it. The math runs in your browser, and we do not save what you enter.
Next step
Tell us about the equipment and we send your request to a lending partner.
Start my loan requestJanover Capital LLC is not a lender and is not the SBA. The lender makes the credit decision. A lender or marketplace may pay us a referral fee if we connect you, at no cost to you. Advertiser disclosure.
How this is computed
We convert both options to today's value, using the loan rate as the discount rate. That asks a plain question: if you can borrow at this rate, which option costs less?
v = (1 + r)^-months, r = loan rate / 12
buying = price - resale x v
leasing = lease x annuity due + (buyout - resale) x v if you buy it at the end
leasing = lease x annuity due if you return itThe loan's payments are worth exactly the amount borrowed when you discount them at the loan rate. So the loan term changes the monthly payment, not the result at today's value.
Lease payments are treated as due at the start of each month, because a lease often collects the first payment at signing. A lease billed at month end costs slightly less.
The implied rate is the yearly rate at which the lease payments and the end value equal the equipment price. It uses the actuarial method in Regulation Z, Appendix J, with a month as the period.
A worked example
Take $80,000 of equipment. A loan needs $8,000 down and finances $72,000 over 60 months at SBA's maximum rate for that size, 13.00% today. The lease costs $1,850 a month for 60 months, with a $8,000 buyout. The equipment is worth $16,000 when the lease ends. These figures are an illustration, not a quote.
The lease implies a rate of 16.39% on the equipment. The loan is at 13.00%. The lower rate is the cheaper money.
| Item | Amount |
|---|---|
| Loan payment, monthly | $1,638.22 |
| Lease payment, monthly | $1,850.00 |
| Buying, at today's value | $71,618 |
| Leasing, at today's value | $77,998 |
| Rate the lease implies | 16.39% |
| Cheaper at today's value | Buying, by $6,380 |
What this leaves out
Taxes, insurance and maintenance. An owner can generally depreciate equipment. An owner may also be able to deduct the cost in the year it is placed in service under section 179. A lessee generally cannot depreciate leased property (IRS Publication 946). Ask your tax preparer which applies to you.
Common questions
Which is cheaper, leasing or buying?
It depends on the rate the lease implies, your loan rate and what the equipment is worth at the end. This tool shows all three.
What if I return the equipment at lease end?
Enter 0 for the buyout. You then own nothing at the end, so the buying side gets credit for the resale value.
How long can an SBA loan run on equipment?
SBA's maximum for equipment is 10 years, or up to 15 years if the IRS asset class useful life supports it. The rule is SOP 50 10 8.1, App. 17, Para. A.2. A lender can set a shorter term. Read the term rule.
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<p><a href="https://www.sbaexpress.loans/tools/equipment-lease-or-buy/">Equipment lease or buy calculator</a> from SBA Express Loans</p>Ask a lending partner about an equipment loan
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Janover Capital LLC is not a lender and is not the SBA. The lender makes the credit decision. A lender or marketplace may pay us a referral fee if we connect you, at no cost to you. Advertiser disclosure.