Machine Buy or Rent Calculator

Compare the same period

The purchase is paid today. Operating costs and rent are paid at each year end. Resale proceeds arrive at the end of the last year and reduce ownership cost at their present value. Annual payments are discounted using the rate entered. With zero discount, purchase cost of 10000, resale value of 2000, annual costs of 1000 and five years, ownership costs 13000. Annual rent of 3000 totals 15000.

Limits

Both options must provide equivalent service for the same duration. Include operating costs paid by the renter in the rental input. Taxes, financing, depreciation deductions, prepaid rent and replacements are excluded. Lower cost alone is not a recommendation to buy.

Discount an example spanning one year

Take a purchase price today of 900, resale value at the end of the year 220, annual operating cost 110 and annual rent and operating cost 990 currency units. Choose one year and an example discount rate of 10 percent. Operating cost has present value 110 / 1.1 = 100 and resale has present value 220 / 1.1 = 200. Ownership cost is 900 + 100 − 200 = 800. Rental present value is 990 / 1.1 = 900. The difference is rental minus ownership, so 900 − 800 = +100. A positive difference means renting costs more under these assumptions.

The rate is an arithmetic input, not a market or financing recommendation. Do not repeat resale value in every year as annual income. It is deducted only at the final year. Purchase price is paid today and is not discounted again.

Treating rent paid in advance as year end rent changes its timing. If maintenance responsibilities differ, include them explicitly in the appropriate cost input. Do not mix nominal cash amounts with a real discount rate. Equal present costs do not equalise differences in availability, service or risk. Changing annual cash flows require a separate cash flow calculation.

Frequently asked questions

How do you calculate the cost of buying or renting a machine?

With example purchase cost 10000, resale value 2000, annual operating cost 1000 and annual rental cost 3000 over 5 years at 8 percent discount, buying costs 12631.54 and renting 11978.13 currency units. This preliminary present value comparison excludes taxes, financing and intermediate replacements.

Calculate with these values