How the comparison works
The calculator compares buying equipment with hire purchase or a loan against leasing it on a finance lease, over the lease term and without discounting. Buying costs the deposit, fees and loan payments, plus whatever you still owe when the lease would end, less what the equipment is then worth. A lease you return costs its rentals and fees. A lease where you pay a final amount to keep the equipment costs that too, and the end value offsets the cost on both sides.
The result is the difference in net cost, which option costs less, the average cost per month and the end value at which the two cost the same. Prices and payments are used as quoted, with no VAT added to either side.
Worked example: £60,000 of equipment over a 36-month lease
Buy with a 10% deposit and a 9% loan over 48 months, and the payment is £1,343.79 a month. After 36 months you have paid £54,376.52 in cash and still owe £15,366.15. Leasing the same equipment for £1,400 a month costs £50,400.00 over 36 months and you return it.
If the equipment would sell for £24,000 and your tax rate is 25%, buying has a net cost of £34,307.00 after £11,435.67 of tax relief, or £952.97 a month. Leasing has a net cost of £37,800.00 after £12,600.00 of relief, or £1,050.00 a month. Buying costs less by £3,493.00.
The break-even end value is £19,342.67. If the equipment would fetch more than that, buying costs less. With no tax rate entered, buying costs less by £4,657.33.
A cheaper lease
With a lease of £1,000 a month and equipment worth £15,000 at the end, leasing costs less by £14,057.00. Buying would need the equipment to be worth more than £33,742.67 to catch up.
Paying a final amount to keep the equipment
If you pay a £15,000 final amount at the end of the lease, the lease costs £50,400.00 in rentals and the final amount, less the end value of the equipment, a net cost of £41,400.00. Leasing costs less by £4,342.67. The tax estimate is switched off for this choice because the tax treatment depends on the agreement.
How the tax estimate works
Under hire purchase you can claim capital allowances and deduct the interest, while under a finance lease you generally deduct the rentals as a business expense, according to Spark Finance. The estimate relieves the cost of owning, which is the price less the end value, plus interest and fees, and the lease payments in full.
It assumes you sell the equipment at the end value. If full expensing was claimed on the whole cost, GOV.UK says the balancing charge equals the sale proceeds, so the allowances are partly clawed back. The estimate ignores timing, so it does not value the early relief from full expensing or the annual investment allowance. Ask your accountant.
What this calculator leaves out
It does not discount cash flows, add VAT, include maintenance, insurance or end-of-lease fees, or model flat-rate or stepped quotes. A VAT-registered business can usually reclaim VAT on both routes, so leaving it out is a fair comparison in that case.
To model one purchase in detail, use the asset finance calculator.
To work out a lease rental, use the lease loan calculator.
Use the right country page
This page uses UK terms and pounds sterling. The country choices above the inputs open separate pages. Choosing United States opens the US version, which uses equipment loans, down payments and $1 buyout leases.
For a US business, use the US equipment loan vs lease calculator.
Inputs for the UK equipment loan vs lease calculator
At the end of the lease
Return the equipment, or pay a final amount to keep it.
Asset price
The cash price before VAT.
Deposit on the loan
Percent of the price paid in cash. The rest is borrowed.
Loan interest rate
The yearly nominal rate, charged monthly.
Loan term
Months to repay the loan in level payments.
Loan fees
Fees paid at the start of the loan.
Lease term
Months of lease rentals. The comparison runs this long.
Lease payment each month
From the lease quote, before VAT.
Lease fees
Fees and non-refundable charges paid at the start.
Final payment to buy
Used only when you pay a final amount to keep the equipment.
Value of the equipment at the end
Your estimate of its sale price. It cannot exceed the price.
Your tax rate on profit
For the tax estimate. Enter zero for a pre-tax comparison.
CALCULATOR QUESTIONS
UK equipment loan vs lease calculator questions
Is it cheaper to lease or buy equipment in the UK?
It depends on what the equipment is worth at the end. In the worked example the break-even end value is £19,342.67. Above that, buying costs less.
What is the difference between hire purchase and a finance lease?
With hire purchase you take ownership at the end for a nominal fee, while with a finance lease the lender keeps ownership and you usually return the asset or pay a final amount.
Does this calculator include VAT?
No. Enter prices and payments as quoted before VAT. VAT is charged up front under hire purchase and on each rental under a lease, which affects cash flow.
How much difference does tax make?
In the worked example, buying costs less by £3,493.00 with tax relief and by £4,657.33 without it.
Does the calculator discount future payments?
No. It adds up cash paid and subtracts the end value, so a later payment counts the same as an earlier one.