Accurate Lease vs. Buy Calculator

Is it better to buy or lease?
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Buy vs. Lease Calculator
Buy vs. Lease Calculator

The lease vs buy calculator makes the lease vs buy decision easy.

  • Considers taxes and depreciation.
  • Features text explanation and cash flow details.
  • Considers MACRS depreciation.
  • Allows for lease-to-own option.

From a financial perspective, the lease vs. buy decision is a complex one. For an accurate analysis, you must take into account many details.

  • Is the asset for personal use or use by a business?
  • If used by a business, is it used 100% of the time by the business, or something less?
  • Is the asset subject to property tax? If so, is property tax applicable to the purchase side or lease side of the analysis?
  • Are you leasing to own?
  • What will be the asset's fair market value at the end of the finance or lease term?
  • Should depreciation be a factor in the analysis?
  • What about various fees? Are they taxable?
  • What is the impact of sales tax? How is sales tax collected?

This buy vs. lease calculator lets the user account for all these variables as well as many more. You will find all the options explained below

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General Info

  • Price of asset - The final negotiated purchase price before taxes or fees.
  • Description of asset to be bought or leased (optional) - The description appears on the printed report.
  • Prospective buyer or lessee (optional) - Name appears on the printed report.
  • Discount rate, cost of capital, or inflation rate (optional) - The calculator uses the discount rate to perform a present value analysis. You may want to enter zero first, look at the results, and then enter a rate to compare it with the first calculation. What rate should you enter? There is no right or wrong answer, but generally, I would suggest entering an assumed inflation rate. The point of this option is to see results based on "today's dollars."
  • Est. annual appreciation (+) / depreciation (-) rate (optional) - An asset may either depreciate (decrease in value - frequently a car) or appreciate (increase in value - such as a building or land). If you want to assume a depreciation or appreciation rate, check the box and enter the rate. However, you do not need to enter a rate. See "estimated resale value" below.
  • Marginal tax rate on ordinary income (optional) - If you want an after-tax analysis, enter your marginal tax rate. Like other options, you may want to set this to "0" for the first calculation, then set the option to compare the difference taxes make on the calculation.
  • Marginal tax rate on sale of asset (optional) - If you need to pay tax on the proceeds from the sale of the asset, enter the projected tax rate.
  • Property tax rate - Some jurisdictions collect property tax on assets. To consider property tax in the analysis, enter the property tax rate as a percentage of the property's value. If you don't know the rate, but you know the tax amount, you can use the percentage calculator #1 on this site to calculate the tax rate. The property tax amount increases or decreases each year, depending on the asset's fair market value each year. (The calculator makes the FMV calculation.)
  • Property tax on purchase - If the "property tax rate" is greater than "0.0%", is the tax levied on the purchase - "Yes" or "No."
  • Property tax on lease - If the "property tax rate" is greater than "0.0%", is the tax levied on the lease - "Yes" or "No."


  • Sales tax on purchase - Enter the tax rate used for calculating sales tax.
  • Will sales tax be financed (optional) - If you want the sales tax amount added to the loan amount, answer "Yes."
  • Purchase down payment (optional) - If you plan to make a down payment, enter it here. If you want your down payment to be a specific percentage of the purchase amount, you can use the percentage calculator #3 on this site.
  • Annual loan rate (optional) - The annual interest rate of the loan.
  • Number of loan payments (optional) - The expected number of loan payments
  • Loan payment - The periodic loan payment amount. If you've checked the checkbox, you need to enter the payment amount; otherwise, the calculator will calculate it.
  • Payment frequency (optional) - The loan's payment frequency. This frequency and the lease's payment frequency must be the same.
  • Estimated resale value or FMV at end of financing - You can enter an estimated resale value of the asset as of the end of the finance term. Or if you enter an estimated "annual appreciation (+) / depreciation (-) rate" on the "General Info" tab, the calculator will calculate the ending FMV for you.
  • Percent of interest that is deductible - Enter a percentage if interest is a tax-deductible expense. Generally, this will either be 0% or 100%.


  • Periodic lease payment amount - The negotiated regular lease payment amount.
  • Number of lease payments - The term of the lease expressed as the number of scheduled payments.
  • Payment frequency - The frequency of the lease payments. This setting must match the loan payment frequency.
  • Sales/Use tax rate (optional) - The sales tax rate for the lease. Enter 0 for no sales tax.
  • Lease sales tax paid when - For this lease vs. buy analysis, the calculator assumes that you pay sales tax on the lease as an up-front lump sum. If this is not the case, set this option according to your lease's terms.
  • Taxable capitalized costs and fees (optional) - Enter the total of all tax-deductible fees.
  • Refundable security or lease deposit (optional) - Enter the sum of all charges that the leasing company will refund to you after the lease (if any).
  • Non-refundable acquisition costs, deposits or fees (optional) - Enter the total of all fees or charges that are not taxable or refundable. (This, of course, does not include the periodic lease payments.)
  • Miscellaneous annual lease expense (optional) - Enter any annual lease expenses not included in the lease payment.
  • Termination fee or Turn-In fee (optional) - If the lease has a termination fee that you must pay, enter it here. However, if you plan to purchase the asset at the end of the lease, enter the "end-of-lease option price" instead.
  • End-of-lease option price (residual value) - If you expect to purchase the asset, enter the purchase price. Your lease agreement will stipulate the purchase price.

Business Rules

  • Percentage used for business - The buy vs. lease analysis is more complicated for businesses. First, you need to determine what portion of the assets use is dedicated to performing a business function. (If this analysis is not for business purposes, enter "0%.")
  • Section 179 Expense (optional) - Some assets, when used by a business, maybe expensed up to certain limits. If you expect to expense the asset's cost (deduct the cost from income taxes), enter the amount you can deduct. The amount may or may not be the entire cost of the asset. See IRS Publication 946.
  • Will you depreciate this asset - If you do not plan to take a 179 Expense deduction equal to the full price, you may be able to take a depreciation deduction on your business taxes. For additional background on depreciation, see the above mentioned IRS publication and the MACRS Depreciation Calculator on this site.
  • Depreciation method used (optional) - Depreciation (applicable to businesses) is a tax deduction taken on the finance side of the lease vs. buy calculation. The deduction can significantly reduce the total cost of financing. Unfortunately, depreciation in the U.S. is a (needlessly) complex topic. But the more time you take to understand it, the more accurate this analysis will be. The depreciation method is dependent upon the asset's type. IRS Publication 946 will guide you in selecting the correct depreciation method. You may also see the above link to the MACRS depreciation calculator for an overview that should help you answer these questions.
    • For automobiles (in the U.S.), in many cases, you may select the GDS 200% DB method, a 5-year property class, a half-year IRS convention, and set "qualified asset" to "yes." There are exceptions!
    • If you are not concerned about (perhaps) excessive accuracy and want to allow something for depreciation, select the depreciation method "ADS Straight Line." Then select an appropriate recovery period and enter "no" for the other options. The analysis will benefit from a depreciation expense, but the analysis will most likely be understating it in the early years of the loan.
  • Property Class (GDS) - Your selection depends on the asset, and IRS Publication 946 linked above will guide you in making the correct choice.
  • Recovery Period (ADS/SL) - The useful life of the asset. You must set the depreciation method to "ADS Straight Line" to see this option.
  • IRS Convention - The three conventions establish when the recovery period begins and ends. Your selection depends on the asset you are financing.
  • Is the asset a listed property - Listed property is any of the following per IRS Pub. 946 p. 51 (pub. Feb. 2024):
    • Passenger automobiles (as defined later).
    • Any other property used for transportation, unless it is an excepted vehicle.
    • Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment).
  • Is the asset a qualified asset - If your asset qualifies, select the special allowance percentage.
  • Is the asset a vehicle (listed property must be "yes") - When "Yes," it activates the many rules pertaining to vehicle depreciation, including maximum depreciation deductions.

Once again, for more information about depreciation, see this page.

What do you think of this lease vs. buy calculator? Did it help you in making a decision? I would love hearing from users to learn if you generally find purchasing or leasing to be the better alternative.

You can let me know in the comments area below. Thanks!

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