1. What is the Buy vs Lease Calculation?

The Buy vs Lease calculation helps determine whether purchasing or leasing equipment is more financially advantageous by comparing the net costs of each option.

2. How Does the Calculator Work?

The calculator uses the equation:

Where:

• \( U \) — Up front costs ($)
• \( LI \) — Lost interest ($)
• \( O \) — Outstanding loan ($)
• \( M \) — Market value ($)

Explanation: The equation sums all costs associated with buying (upfront, lost interest, and outstanding loan) then subtracts the equipment's current market value.

3. Importance of Buy vs Lease Analysis

Details: This analysis is crucial for businesses to make informed decisions about capital expenditures, cash flow management, and tax implications of equipment acquisition.

4. Using the Calculator

Tips: Enter all dollar amounts as positive values. The calculator will determine if buying is more expensive (positive result) or less expensive (negative result) than leasing.

5. Frequently Asked Questions (FAQ)

Q1: What counts as "lost interest"?
A: This is the opportunity cost of the money tied up in the equipment that could have been earning interest elsewhere.

Q2: How do I determine market value?
A: Check recent sales of similar used equipment or consult equipment valuation guides.

Q3: Should tax implications be considered?
A: Yes, tax benefits of leasing (operating expense) vs buying (depreciation) should be factored into final decisions.

Q4: What's a good rule of thumb for buy vs lease?
A: Generally, lease if you need equipment short-term or it becomes obsolete quickly; buy if you'll use it long-term.

Q5: How does maintenance factor into this?
A: Leases often include maintenance, while buying requires separate budgeting for upkeep - these costs should be added to the analysis.