Equipment Lease vs Buy Calculator 2026
Lease or buy equipment? Present value of after-tax cost under each — loan payments, §179 / 100% bonus depreciation, resale value, lease payments, buyout and the implied lease rate — plus year-1 cash flow and the break-even lease payment. IRS 2026 limits confirmed.
| Buy — loan payment | — |
|---|---|
| Buy — year-1 tax deduction | — |
| Buy — present value of after-tax cost | — |
| Lease — total payments | — |
| Lease — implied interest rate | — |
| Lease — present value of after-tax cost | — |
| Cheaper option | — |
| Cash flow in year 1 (after tax) | — |
| Break-even lease payment | — |
In short
Buying equipment usually wins in 2026 for profitable businesses because the entire price can be deducted in year one under 100% bonus depreciation or the $2,560,000 §179 limit, while lease payments are deductible only as paid; compare the present value of after-tax cash flows, including the tax saving on depreciation, the resale value and the lease's implied interest rate (often 8–20%). Leasing wins when cash is tight, there is no profit to shield or the equipment becomes obsolete quickly.
Who this is for: US businesses acquiring vehicles, machinery or technology in 2026.
Lease or buy equipment?
- Buying: down payment plus loan payments; interest and depreciation are deductible — and under the 2025 law the whole price can be expensed in year 1 (§179 up to $2,560,000, or 100% bonus depreciation with no limit). You own the resale value.
- Leasing: lower upfront cash, payments deductible as paid, flexibility to upgrade; but you pay the lessor's implied rate (often 8–20%) and own nothing unless you exercise the buyout.
- Compare on present value: discount each year's after-tax cash flows at your cost of capital, including the tax saving on depreciation and the after-tax resale value — that is what this calculator does.
- Year-1 cash matters as much as total cost for growing businesses: a §179 write-off can make buying cheaper in year 1 even with a down payment.
- $1 buyout vs FMV lease: a $1 buyout is a loan in disguise (you depreciate the asset); an FMV lease is a true rental.
See also: Cost Segregation Calculator 2026, Car Lease vs Buy Calculator.
Assumptions
- Buy: down payment + loan payments − tax savings on interest and depreciation (full price in year 1 if expensed, else straight-line) − after-tax resale, discounted at the entered rate.
- Lease: payments × (1 − tax rate) each year + buyout at the end, discounted.
- Implied lease rate solved from payments and buyout against the price; break-even lease payment solved for equal present value.
Worked example
Loan payment $2,770 a month on $135,000. Expensing the full $150,000 saves $45,000 of tax in year 1, and the $40,000 resale (taxed as recapture) is worth $28,000 after tax. Present value of buying: about $79,100. Lease: $192,000 of payments plus the buyout (implied rate about 9.45%) deductible as paid, PV about $109,100. Buying wins by roughly $30,100. Leasing would only beat buying below about $2,054 a month. Year-1 cash: buying is roughly break-even after the $45,000 write-off and interest deduction offset the down payment and loan payments, versus −$24,780 for the lease.
Frequently asked questions
Is it better to lease or buy equipment for taxes?
Buying usually wins in 2026 because 100% bonus depreciation and §179 let you deduct the entire cost in year 1; lease payments are only deductible as you pay them.
What is the Section 179 limit for 2026?
$2,560,000 of qualifying equipment, phasing out dollar-for-dollar above $4,090,000 of purchases — and bonus depreciation covers anything beyond that.
What interest rate is hidden in a lease?
Solve for the rate that makes the payments plus buyout equal the price — commonly 8–20% for equipment leases, higher for weaker credit.
What if my business has no profit?
Then the write-off has no immediate value (it carries forward), and leasing or a longer loan may be better for cash flow.
Does Section 179 apply to vehicles?
Yes, with limits: heavy SUVs and trucks over 6,000 lb GVWR get a larger first-year amount; passenger cars are capped by luxury-auto limits.
What is a TRAC lease?
A terminal rental adjustment clause lease for vehicles — you share in the resale gain or loss at the end; treated as a true lease for tax.
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