Lease vs. Buy ROI Calculator

Making lease vs. buy decisions using the right data is a proven way to drive savings for equipment leases. Use this calculator to estimate the savings potential that is generated by a FMV (Fair Market Value) equipment lease. This is based on a 36-month lease term, typically Information Technology (IT) or material handling equipment.

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Annual equipment capital budget

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Annual equipment purchases i

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Average savings 7% i

Savings

From leasing

Typical annualized income statement savings i

From leasing using
competitive bidding

Competitively bid annualized savings i

Effect of returning leased items past end of term

1 month delay in return

3 month delay in return

Savings assuming a 36-month FMV type lease. (Typical IT Equipment)
The analysis assumes a financeable credit with a minimum of 3 bidders.
The analysis assumes about a 7% savings of the original equipment cost for the competitively bid example.

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Lease vs Buy

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Definitions

Cash flow benefits of a lease – The cash flow benefits of a lease compared to a cash purchase is simply comparing the Present Value (PV) of the lease payment during the initial term and the original invoice price of the equipment (exclusive of amounts, if any, paid for taxes, warranty extensions or service contracts.) The difference in these two amounts is the upfront cash flow benefits from paying monthly lease payments over the term and not having to pay for the residual value that the lessor is providing through the lease structure.

Income statement benefits from a lower monthly lease payment – The benefit is comparing the straight-line depreciation expense under a purchase scenario with the monthly lease payment expense. The lease payment will be smaller than the depreciation expense as the lease price includes a residual value investment made by the lessor, thereby saving the lessee cost over the lease term. The lessee only pays for the asset during the term for when it is being used.

Competitive lease bid benefit expressed as a % of the original price of the equipment – The savings from a competitively bid lease transaction is derived by comparing the total amount of lease payments during the initial term from the competitively bid lease price versus the total amount of lease payments during the initial term from the typical lease price structure. The amount saved with the competitive bid is then expressed as a % of the total amount paid with the typical lease price. We also compare the amount saved with the competitive bid against the original equipment cost expressed as a % saved.