# Equipment Buy vs. Lease Calculator (Canadian)

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Should you lease or buy equipment? Use this calculator to find out! The tool calculates your monthly payments and your total net cost. By comparing these amounts, you can determine which is the better value for you.

## Equipment Buy vs. Lease Calculator (Canadian) Definitions

Purchase price
Total purchase price.
Down payment
Amount paid as a down payment, which for leases is often called a capital reduction.
GST + PST or HST (%)
Tax percentage rate charged on this purchase in your province. GST + PST or HST is included in each lease payment. GST + PST or HST for buying is charged on the total sale amount.
Investment rate of return
Rate of return on investments. This is the return that you would make if you were to invest your down payment or security deposit instead of using it in your equipment purchase or lease.

The actual rate of return is largely dependent on the type of investments you select. For example, the total return including dividends of the S&P/TSX Composite Index for the 10 year period from December 31, 2013 through December 31, 2023 was 8.6% (source www.spglobal.com). Savings accounts at a bank or credit union may pay as little as 2% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.

Loan term in months
Term in months for your equipment loan. Typically this is 36, 48, 60 or 72 months. If your loan term is longer than your lease term, tool compares the buy vs lease options to the time the lease expires, and then use your remaining loan term to calculator you outstanding loan balance.
Loan interest rate
Annual interest rate for your loan.
Other fees
Any fee, other than a capital reduction or down payment, required to be paid at the time of purchase. This may include license, title transfer fees, etc.
Annual depreciation
The rate of depreciation gauges how fast your new equipment will lose its market value. A high depreciation rate is about 20% per year, medium is 15% per year and low is 10% per year.
Market value of equipment
Value of your equipment after the lease term is over.
Net cost of buying
This is the total cost of buying your equipment. This is calculated as:
1. + Total up Front Costs (down payment + other fees)
2. + Lost interest
3. + Outstanding loan balance at time lease expires
4. - Market value of equipment at time lease expires
5. = Net cost of buying

The lost interest on your purchase includes any interest you would have earned at your investment rate of return on the buy option's down payment and other fees. If the monthly payment for leasing is less than the monthly payment for buying, this also includes any lost interest due to the higher monthly payments. If leasing is more expensive than buying, your interest costs for buying are reduced by the amount of interest you would earn on the difference.

Lease term in months
Term in months for your equipment lease.
Lease interest rate
Annual interest rate for your lease.
Other fees
Any fee, other than a capital reduction or down payment, required to be paid at the close of the lease. This may include license, title transfer fees, etc.
Residual percent
For leases, this is remaining value after the lease term expires. The higher this amount, the lower your lease payment will be.
Security deposit
Refundable security deposit required at time of lease. The tool assumes that the security deposit is fully refunded at the time the lease ends.
Net cost of lease
This is the total cost of leasing your equipment. This is calculated as:
1. + Total up Front Costs (capital reduction + other fees)
2. + Total Lease Payments
3. + Lost Interest on Lease
4. = Net cost of lease

The lost interest on your lease includes any interest you would have earned at your investment rate of return on the lease option's down payment, security deposit and other fees. Please see the definition for 'Net cost of buying' for an explanation on how the calculation accounts for any interest you might earn by having a lower monthly lease payment.