Finance Lab
Lease against buying outright
Compare leasing an asset with paying cash for it, in today's money.
Both paths are discounted at your cost of capital. Buying = price now, less the discounted resale value at the end. Leasing = the discounted stream of lease payments, less the discounted purchase option if you take it.
Step 1 · Enter your figures
Every box starts with an example figure. Replace each one with your own — the result updates as you type. Nothing you type is sent anywhere or stored.
What the asset costs if you pay for it outright.
What you expect the asset to be worth when you finish with it.
The payment under the lease.
The period over which both paths are compared.
Amount payable to own the asset at the end. Enter nil if you hand it back.
The return your money earns elsewhere, used to bring both paths to today's money.
Step 2 · Read the result
Cost of leasing, in today's money
$52,991
- Cost of buying, in today's money
- $50,420
- Difference
- $2,571Above nil, leasing costs more in today's money on the figures entered. Below nil, buying costs more.
- Cash you keep in year one by leasing
- $46,800
- Cost of buying, in today's money$50,420
- Difference$2,571
- Cash you keep in year one by leasing$46,800
What this answer rests on (10)
- Cash price to buy$60,000
You entered this
What the asset costs if you pay for it outright.
- Resale value at the end$15,000
You entered this
What you expect the asset to be worth when you finish with it.
- Monthly lease payment$1,100
You entered this
The payment under the lease.
- Term compared5.0 years
You entered this
The period over which both paths are compared.
- Purchase option at the end of the lease$0.00
You entered this
Amount payable to own the asset at the end. Enter nil if you hand it back.
- Your cost of capital9.0%
You entered this
The return your money earns elsewhere, used to bring both paths to today's money.
- Both paths are discounted at the rate you entered; the comparison changes if that rate changes.
The calculator applied this
- Tax treatment is not modelled — deductibility differs between a lease and an owned asset and depends on your circumstances.
The calculator applied this
- Maintenance, insurance and running costs are assumed identical under both paths.
The calculator applied this
- The resale value is your own estimate. Nothing is assumed about market values.
The calculator applied this
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Save to my workspaceRead this before you rely on the result
- Purchase option at the end of the lease is at the lowest figure this calculator accepts. The result reflects that limit, not a figure below it.
What this means for you
Which of leasing and buying outright costs less once both are brought back to today's money.
How to read it
- The difference is the whole answer — everything above it is the working.
- The cash kept in year one shows what leasing buys you: flexibility, not saving.
- If the difference is small, decide on flexibility and obsolescence rather than the arithmetic.
Watch out for
- Ignoring the resale value of an owned asset. It is often the deciding figure.
- Tax treatment, which differs between the two and is not modelled here.
- Lease terms that run longer than you will actually use the asset.
Assumptions behind this result
- Both paths are discounted at the rate you entered; the comparison changes if that rate changes.
- Tax treatment is not modelled — deductibility differs between a lease and an owned asset and depends on your circumstances.
- Maintenance, insurance and running costs are assumed identical under both paths.
- The resale value is your own estimate. Nothing is assumed about market values.
General information only. This calculator does not take your circumstances into account and is not financial, tax, legal or investment advice. Confirm every rate, threshold and figure with your own adviser before acting.
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Take this further
Members run this calculator on their own recorded figures, save the workings to their workspace, export them to Word or Excel, and read the lessons that teach the thinking behind the result.