Why is the lease payment so much lower?

Because you are only paying for the value the car loses during the term, not for the car. At the end you have nothing, which is the part a monthly comparison hides.

Businessfinance

Equipment Lease vs Buy Calculator

Leasing against buying a piece of equipment over the lease term, netted against the residual value you still hold. The same comparison as a vehicle, and the residual assumption matters even more because specialised kit can be worth very little second-hand.

Also called: equipment leasing calculator, machinery lease or buy.

Which costs less

Leasing costs less

Leasing costs less over 36 months. Leasing costs ₹19,200 and buying costs ₹20,093 after the ₹19,250 the car is still worth.

Total spent on the lease

₹19,200

Total spent buying

₹26,960

Car value at the end

₹19,250

Net cost of buying

₹20,093

Equity you hold at the end

₹6,867

Difference

₹893

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

How this is calculated

A lease covers the value consumed during the term; a purchase leaves you owning an asset with whatever resale value it still has. Compare what you spent less what you still hold. For equipment the residual is the number to be sceptical about: highly specific machinery often has almost no second-hand market, which pushes the honest comparison towards leasing.

buying costs the payments made less the car you still own; leasing costs every payment and leaves nothing

V_r: Resale value at the end of the term (currency)
B_r: Loan still outstanding (currency)

Method and limits

What it assumes

The comparison runs over the lease term, with the loan balance at that point treated as still owed.
Insurance, maintenance and fuel are similar either way and are excluded.

What it deliberately does not model

Mileage penalties, wear charges and early termination fees are real lease costs and are not modelled.
Business tax treatment differs sharply between the two and is not applied.
Capital allowances and the accounting treatment of a finance lease differ by market and are not applied.

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Frequently asked questions

Why is the lease payment so much lower?: Because you are only paying for the value the car loses during the term, not for the car. At the end you have nothing, which is the part a monthly comparison hides.