Lease vs Buy: Making the Right Decision for Your Business
One of the most common financial dilemmas business owners face: should I lease or buy? Whether it is equipment, a vehicle, or commercial property, the answer is rarely obvious. Both options have legitimate advantages — and the "right" choice depends on your cash flow, tax situation, and how long you plan to keep the asset.
This calculator helps you compare the total cost of both options, factoring in everything from loan interest to tax deductions to resale value.
When Leasing Makes Sense
- Lower upfront costs — Minimal down payment preserves working capital
- Predictable monthly expenses — Fixed payments simplify budgeting
- Always have the latest equipment — Upgrade at end of lease term
- 100% tax deductible — Lease payments are operating expenses
- No maintenance headaches — Many leases include service
When Buying Makes Sense
- Lower long-term cost — No interest payments eating into your budget
- Build equity — You own the asset after paying it off
- Resale value — Sell the asset when you are done with it
- No usage restrictions — Customize and use as you wish
- Section 179 depreciation — Potentially deduct full cost in year one
The Breakeven Point
This is the most important concept in lease vs buy decisions. The breakeven point is when cumulative buying costs equal cumulative leasing costs. Before that point, leasing is cheaper. After that point, buying is cheaper.
For most equipment and vehicles, the breakeven point falls between year 3 and year 5. If you plan to keep the asset longer than that, buying is usually the better financial decision. If you only need it for 2-3 years, leasing wins.
The chart in this calculator visualizes this comparison so you can see exactly where your breakeven point lands.
FAQ
Yes, lease payments for business equipment are generally 100% tax deductible as ordinary business expenses. This is one of the main advantages of leasing — the full payment reduces your taxable income in the year it is made.
Section 179 lets you deduct the full purchase price of qualifying equipment in the year you buy it, instead of depreciating over several years. For 2026, the limit is $1,160,000. This can make buying significantly more attractive tax-wise than the standard depreciation schedule.
Leasing a business vehicle offers lower payments and easy upgrades every 2-3 years. Buying costs less long-term if you keep the vehicle 5+ years. If you drive 15,000+ miles/year, buying usually makes more sense due to mileage limits on leases.
Yes. Everything in a lease is negotiable — the monthly payment, term length, mileage limits, and end-of-lease terms. Always compare quotes from multiple lessors and read the fine print on maintenance responsibilities and early termination fees.