Equipment Lease vs Buy Calculator for 2026

Compare the net after-tax cost of leasing versus buying business equipment, including Section 179 deductions and residual value.

Mathematical Audit

How Lease vs Buy Cost Is Calculated

Buying nets the loan cost against Section 179 tax savings and the equipment's resale value at the end of the period. Leasing nets total lease payments against the tax deduction from expensing them as a business operating expense.

Net Cost of Buying = Down Payment + Total Loan Payments − Section 179 Tax Savings − Residual Value + Opportunity Cost of Down Payment
Net Cost of Leasing = (Lease Payments × Term) + End-of-Lease Buyout − Lease Tax Savings
Section 179 Tax Savings = min(Section 179 Deduction, Equipment Cost) × Tax Rate

For 2026, the maximum Section 179 deduction is $2,560,000, phasing out once qualifying purchases exceed $4,090,000. Section 179 only applies to buying (or a lease structured as a conditional sales/$1-buyout contract) — a true fair-market-value operating lease deducts the lease payments themselves instead.

Operational Guide

How to Use the Lease vs Buy Calculator

1

Enter Equipment Cost & Down Payment

The purchase price and how much cash you'd put down if buying.

2

Enter Loan Terms

Interest rate and term in months for financing the remaining balance if you buy.

3

Enter Lease Terms

Monthly lease payment, term, and any end-of-lease buyout amount.

4

Set Tax Rate & Section 179

Your effective tax rate, and whether you'll claim Section 179 on the purchase.

5

Review the comparison

See the net after-tax cost of each option and which one comes out cheaper.

Real-World Scenario Example

"A business considers buying $100,000 of equipment with a $10,000 down payment at 8% over 60 months, versus leasing it for $2,200/month over 60 months with a $1 buyout, at a 25% tax rate with Section 179 applied."

Inputs

equipmentCost:100000
downPayment:10000
loanInterestRate:8
loanTermMonths:60
leaseMonthlyPayment:2200
leaseTermMonths:60
leaseEndBuyout:1
residualValuePercent:20
taxRate:25
applySection179:true
section179Deduction:100000
opportunityCostRate:6

Result

Buying nets out cheaper after the Section 179 deduction and residual value are factored in, despite the larger upfront cash commitment.

Important Disclaimer

This calculator provides an estimate only and is not tax advice. Section 179 eligibility, depreciation rules, and lease classification depend on your specific situation — consult a tax professional before making a financing decision.

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Sources & References

IRS — Income & Expenses FAQ (Lease vs. Conditional Sales Contract)

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses-7

Section179.org — 2026 Section 179 Tax Deduction: Limits & Calculator

https://www.section179.org/