Free Contractor Tool
Equipment Lease vs Buy Calculator
Comparing two monthly payments is how contractors get this wrong. Compare total cash out over the years you will actually use the equipment — minus what you still own at the end.
Built by SubcontractorHub — the software contractors use to quote, finance, and run every job.
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Compare Lease and Purchase
Start with how long you will keep it. That single input decides most lease-versus-buy questions before any of the financing terms matter.
The single most decisive input.
Option A — Buy (financed)
= $19,500. This is what you still own at the end.
Monthly payment: $1,142
Total cash out: $91,703
Less resale: −$19,500
Net cost $72,203
Option B — Lease
$1 buyout, or fair market value.
Total of payments: $69,000
Total cash out: $84,701
Less resale: −$19,500
Net cost $65,201
Over 6 years
Leasing costs $7,002 less
Cash required up front: $10,000 to buy versus $2,500 to lease. If that difference is the reason you are considering a lease, that is a cash-flow decision rather than a cost decision — and a legitimate one.
Because you plan to take the buyout, both options end with you owning the equipment, so the comparison is purely about financing cost.
This is a pre-tax cash comparison. It does not model Section 179 or bonus depreciation, the timing value of deductions, sales or use tax, insurance differences, lease-end wear-and-tear or excess-usage charges, early termination penalties, or the effect of either option on your borrowing covenants — any of which may change the answer materially. Cash flows are not discounted to present value. All calculations are estimates based on historical information and should be verified by the user. This tool is provided as a free service for planning purposes only and is not a substitute for professional accounting, financial, or tax advice.
From Material Takeoffs to a Signed Proposal
SubcontractorHub is the platform contractors use to turn takeoffs like these into a branded proposal, financing the customer can accept on the spot, and a scheduled job — without re-entering the job anywhere. This tool is free to use; the platform is here if you want a closer look.
Equipment decisions are downstream of capacity: the question is rarely whether a lease is cheaper, but whether the work exists to keep the asset busy. If a new truck or crew is meant to serve growth you have not yet won, financing options on the customer side often produce more capacity than another vehicle does — and better scheduling is cheaper than either.
The Comparison Most Contractors Get Wrong
The right formula
Net cost = total cash out over the holding period − what you still own at the end
A lease payment is almost always lower than a loan payment on the same equipment, and that comparison is meaningless on its own. The loan is buying you an asset; the lease is renting one. Unless you subtract the resale value at the end of the period, you are comparing a purchase against a rental and concluding that renting is cheaper.
The decisive variable is holding period. Over a term shorter than the financing, leasing often wins. Held well past the loan payoff, a purchase pulls ahead sharply, because you keep using an asset you have stopped paying for. Contractors who trade equipment every three years and contractors who run it for twelve should reach opposite conclusions from identical quotes.
Two structures worth distinguishing before signing: a $1 buyout lease is a financed purchase wearing different clothes, while a fair market value lease has lower payments but you own nothing unless you pay market value at the end. And there is a legitimate reason to lease even when it costs more — if the down payment would leave you unable to cover payroll, preserving cash is worth paying for. Just make that trade knowingly rather than because one number looked smaller.
Frequently Asked Questions
- Is it better to lease or buy equipment for a contracting business?
- Buying usually wins on total cost when you keep the equipment past the financing term, because you own an asset with residual value instead of handing it back. Leasing usually wins on cash flow and flexibility, and on equipment that dates quickly or that you genuinely need to swap every few years. The honest test is how long you will keep it: the longer the hold, the more buying pulls ahead, because the resale value lands in your pocket rather than the lessor's.
- How do you compare leasing and buying fairly?
- Compare total cash out over the same number of years, then subtract what you still own at the end. For a purchase that means down payment plus all loan payments, minus the resale value of the equipment at the end of the analysis period. For a lease it means any upfront cost plus all lease payments, plus a buyout if you intend to take it, minus resale only if you actually buy it out. Comparing a monthly lease payment against a monthly loan payment alone is the most common mistake, because it ignores the asset you end up owning.
- What is a fair money factor or interest rate on equipment leasing?
- Equipment lease pricing is rarely quoted as a plain interest rate, which is exactly what makes it hard to compare. The practical approach is to ask for the total of all payments plus any buyout, then compare that against the cash price — the difference is what the financing costs you, whatever it is called. If a lessor will not state the total of payments, that is itself informative.
- Does Section 179 change the lease versus buy decision?
- It can change it substantially, which is why this decision is worth running past your accountant rather than settling from a calculator. Section 179 and bonus depreciation may allow a business to deduct a large share of a qualifying purchase in the year it is placed in service, while lease payments are generally deducted as they are paid. The value of that timing depends on your taxable income, your entity type, and current limits, so the after-tax answer can differ from the pre-tax one shown here.
- What is a fair market value lease versus a $1 buyout lease?
- A $1 buyout lease is essentially a purchase financed over the term — you will own the equipment at the end for a nominal amount, and payments are correspondingly higher. A fair market value lease has lower payments but you must pay market value to keep the equipment, or return it. They are different products despite being sold in the same conversation, and comparing their monthly payments side by side without accounting for the buyout is how contractors end up surprised at the end of a term.
- How does maintenance factor into the decision?
- If a lease bundles maintenance and a purchase does not, the payments are not comparable until you add an estimated maintenance cost to the purchase side. The same applies to warranty coverage. Add your realistic annual maintenance and repair estimate to whichever option does not include it before you compare totals, or you will systematically favour the bundled option.
- Does leasing protect my borrowing capacity?
- Sometimes, and it is a real consideration for a growing contractor. Equipment leases may sit outside the covenants on your operating line, preserving room to borrow for working capital — which matters more than a few thousand dollars of total cost if cash is your binding constraint. Lenders increasingly look at lease obligations too, so confirm with your bank rather than assuming.
- When does leasing clearly make more sense?
- When you will genuinely return the equipment on schedule, when the technology dates fast enough that owning an ageing unit is a liability, when you need the equipment for a defined contract rather than indefinitely, or when the down payment on a purchase would leave you unable to cover payroll. Leasing to avoid a down payment you cannot afford is a legitimate reason; leasing because the monthly payment looks smaller than a loan payment is usually not.
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Book a DemoThis is a pre-tax cash comparison and does not model Section 179, bonus depreciation, the timing value of deductions, sales or use tax, insurance differences, lease-end wear-and-tear or excess-usage charges, early termination penalties, residual-value risk, or covenant effects on your credit facilities. Lease pricing is frequently quoted without a stated interest rate, so confirm the total of all payments plus any buyout before comparing. Resale values are assumptions, not guarantees. All calculations are estimates based on historical information and should be verified by the user. This tool is provided as a free service for planning purposes only and is not a substitute for professional accounting, financial, or tax advice — consult your accountant before making an equipment financing decision.