Own vs Lease
Should you own or lease your equipment or premises? A total cost comparison over the asset's useful life.
The assumptions
5-year asset life. Purchase price $200,000. Lease rate $4,200/month. Residual value at end of ownership 25%. Maintenance responsibility differs — owner pays all, lessee pays consumables only. Discount rate 5%. Financing cost for purchase 6.5% p.a.
What the spreadsheet says
Owning is approximately $15,000 cheaper over 5 years in this base case — but leasing preserves cash and transfers maintenance risk to the lessor.
What the spreadsheet cannot say
The model treats maintenance costs as predictable, which they rarely are. It also ignores the strategic flexibility of leasing — the ability to upgrade mid-term or walk away. Tax treatment may also differ depending on structure.
The question
For a significant piece of equipment or commercial premises, is it cheaper to own outright or to lease over the useful life?
What might change the answer
- Interest rates — higher borrowing costs tilt the equation toward leasing
- Residual value uncertainty — if the asset depreciates faster than expected, ownership looks worse
- Maintenance surprises — unexpected repair costs hit owners, not lessees
- Tax treatment — leasing may offer different deduction profiles depending on your structure
- Strategic flexibility — leasing lets you exit or upgrade more easily