Deciding between leasing vs purchasing new equipment? Our free Equipment Lease vs Purchase Calculator uses Net Present Value (NPV) analysis to help businesses make the most financially sound choice. Evaluate cash flows and total costs easily.
Formula:
The calculator determines the Net Present Value (NPV) for both leasing and purchasing scenarios, considering initial costs, ongoing payments, maintenance, tax implications, and the discount rate over the equipment's lifespan or lease term. The general NPV formula is:
NPV = Σ t=0n [CFt / (1 + r)t]
- CFt: Net cash flow at time
t - r: Discount rate
- t: Time period
- n: Total number of periods
The option yielding the lower (less negative) NPV typically represents the better financial choice, minimizing present value costs.