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Lease vs Buy Calculator

Evaluate full lifecycle costs, cash outlays, and asset appreciation between leasing and buying commercial property.

Occupier Decision Analysis

Lease vs Buy Calculator

Compare total financial outlay between leasing and buying commercial property over your holding period

Lease Scenario Inputs
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Purchase Scenario Inputs
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10-Year Financial Outlay Comparison

Total lease payments vs net purchase cost (down payment + mortgage paid minus net equity at sale)

Financially Advantageous OptionBuying Saves $1,083,524
1. Leasing Total Outlay10 Years Pure Expense
$1,375,666
  • Year 1 Annual Rent:$120,000
  • Year 10 Annual Rent:$156,573
  • Equity Accumulated at End:$0
2. Buying Net Outlay10 Years Net Cost After Equity
$292,142
  • Down Payment + Debt Paid:$1,543,836
  • Year 10 Net Proceeds at Sale:$1,251,694
  • Year 10 Future Market Value:$2,419,049

What Is a Lease vs Buy Analysis and Why It Matters

A Lease vs Buy analysis is the fundamental financial framework used by owner-occupiers and business owners when deciding whether to lease or purchase office, retail, or industrial space. Leasing requires lower upfront capital and offers operational flexibility, but 100% of lease payments represent unrecoverable expenses with zero equity build-up. Purchasing requires an initial down payment and ongoing mortgage debt service, but monthly principal paydown acts as a forced savings mechanism while building substantial long-term equity through property appreciation.

The Formulas

Total Lease Outlay = Sum of [ Annual Rent × (1 + Escalation Rate)^Year ] Net Buy Outlay = Down Payment + Cumulative Mortgage Paid − Net Sale Proceeds at Exit Net Sale Proceeds = Purchase Price × (1 + Appreciation Rate)^Years × (1 − Selling Cost %) − Remaining Balance
Rent & Escalation:Initial monthly rent and annual contractual rent escalation rate (typically 2.5% - 3.5%)
Purchase & Down Payment:Property purchase price and equity down payment (SBA 504 loans require as low as 10% down; conventional 25%)
Appreciation & Exit Cost:Expected annual property growth rate and broker commissions/closing costs upon sale (typically 5% - 6%)

A Real 10-Year Lease vs Buy Example ($1.8M Purchase vs $10k/mo Rent)

Suppose a company requires an office space for 10 years: - Option A (Lease): Initial monthly rent of $10,000 with 3.0% annual escalation. Total rent paid over 10 years = $1,375,666. - Option B (Buy): Purchase price of $1,800,000 with 25% down ($450,000) and $1,350,000 loan (6.5% interest, 25-yr amort). Annual appreciation of 3.0% and 5% selling cost at Year 10. - Total mortgage debt service paid over 10 years = $1,092,729 - Property value grows to $2,419,493 at Year 10. Net sale proceeds after selling costs and remaining loan balance = $1,253,303 - Net Cost of Buying = $450,000 + $1,092,729 − $1,253,303 = $289,426 【Result】: Buying saves approximately $1,086,240 over the 10-year holding period compared to leasing.

Frequently Asked Questions

When should a company choose to lease instead of buy?

Companies in rapid growth phases, those needing to preserve capital for core operations, or businesses with uncertain spatial requirements (likely to move in 3-5 years) should choose leasing to maintain capital agility.

What loan options exist for owner-occupier buyers?

In the US, owner-occupiers (occupying >51% of space) can leverage SBA 504 or SBA 7(a) loan programs, which offer down payments as low as 10% with long-term 25-year fixed financing terms.

How is the "Net Outlay" calculated for the buying option?

Net Outlay accounts for equity recovery upon sale: Net Outlay = (Down Payment + Total Mortgage Debt Service Paid) minus (Net Cash Realized from Selling at Exit). Because accumulated equity and appreciation are recovered at sale, net purchasing cost is often far lower than total rent over long horizons.

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