Buy or Lease Equipment: Compare the Total Commitment
Compare buying and leasing over the same period and for the same equipment service. Add upfront charges, recurring payments, maintenance and end-of-term obligations, then show ownership and likely residual value separately. A lower monthly payment does not establish a lower total cost or an affordable commitment. Unanswered proposal terms should remain visible.
What you’ll get from this guide: Prepare a common-period proposal table and a list of terms requiring clarification.
- Include all payments, services and end obligations.
- Distinguish ownership and assumed resale value from cash already available.
- Get actual tax and contract treatment checked before choosing.
Use this worksheet after obtaining written proposals for the equipment your business needs. It is a pre-tax comparison of commitments, not a recommendation for a finance product. It helps you identify missing terms before an adviser reviews the offers.
Match the equipment and period first
Compare the same capacity, specification and 36-month service requirement. A cheaper proposal for slower or less reliable equipment is not equivalent. List installation, support, consumables and maintenance responsibilities alongside the price.
Business.gov.au's equipment comparison explains that buying and leasing differ in payment patterns and ownership. The documents control the actual offer. Do not assume a lease includes repairs, a right to upgrade or a purchase option unless the proposal says so.
Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax. Undiscounted figures. The initial lease charge is separate from all 36 payments. GST cash movements, finance costs for buying and income-tax effects are outside this example.
| Item | Cash purchase | Lease proposal |
|---|---|---|
| Equipment upfront | $18,000 | $1,000 initial charge |
| Installation upfront | $1,000 | $1,000 |
| Monthly payments | None | 36 × $600 = $21,600 |
| Maintenance over period | $1,800 | Included as quoted |
| Known payments | $20,800 | $23,600 |
| End ownership | Business owns equipment | Return; no purchase option assumed |
| Estimated net resale value | $8,000 | $0 |
| Known payments less resale | $12,800 | $23,600 before unknown end charges |
| Unresolved term | Confirm resale estimate | Return freight and condition charges: unknown |
Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.
The purchase needs $19,000 upfront and another $1,800 over the period. Subtracting a possible $8,000 sale at the end does not reduce the initial bank payment. The lease needs $2,000 initially plus the first instalment if it is due immediately. Write that date into the cash schedule.
This incomplete lease proposal has known payments of $23,600. Its total cannot be finalised until return costs and other end obligations are answered. Leave those charges marked unknown until the supplier answers.
Ask the supplier for the missing answers
Record whether payments are in advance or arrears, the number of instalments, any deposit refund conditions, fees, maintenance exclusions, usage limits, insurance responsibility and end-of-term charges. Ask what happens if the business stops needing the equipment. Have termination and guarantee clauses explained rather than interpreting them from this table.
If ownership is optional, obtain the purchase price and conditions in writing. Build separate return and purchase scenarios instead of silently assuming the equipment becomes yours. Add any remaining payments after the comparison period, or extend the period to cover them.
Add the business's cash and adviser inputs
Put payment dates through the equipment cash-affordability worksheet. If buying needs borrowing, include the actual finance proposal's interest, fees and repayment dates; a cash-purchase total is not a financed-purchase total.
Ask your registered tax adviser to confirm how each specific arrangement affects GST, deductions and timing. Labels on a proposal do not establish tax treatment. Keep that reviewed tax schedule separate from the pre-tax payment comparison, then combine the two deliberately. No deduction or credit has been calculated here.
Where to get help
Your accountant can compare the full commitments, tax inputs and the time value of money. Have unfamiliar contract terms reviewed before signing. If the existing machine could keep working, use the repair-versus-replace worksheet and browse the pricing and profit hub.
Where to go from here
Repair or Replace Business Equipment? Compare Future Costs
Test whether repairing the existing equipment is an option.
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Check a supplier discount against cash timing and finance costs.
3 min readWill a New Service Add Profit or Just More Work?
Continue the “compare operating choices” reading sequence.
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General information only. This guide doesn't take your personal or business circumstances into account and isn't financial, legal or tax advice. Rates and thresholds change — check the official sources linked in this guide and get qualified advice where your circumstances require it.