Phase 1 · Core Sovereign Layer
CapEx vs OpEx ROI Calculator
Owning isn't automatically cheaper, and leasing isn't automatically flexible-for-free. Compare both paths in today's dollars — salvage, maintenance and your cost of capital included.
Is it cheaper to buy equipment or lease it?
Compare both paths as a present value, not a sticker price, because lease payments are spread over years while a purchase is paid up front. Discount every future cash flow at your cost of capital: buy = price + (annual maintenance × annuity factor) − salvage ÷ (1 + r)N, and lease = annual lease × annuity factor. The lower present value wins.
- The annuity PV factor is (1 − (1 + r)−N) ÷ r — it converts a recurring yearly cost into one number in today’s dollars.
- Worked example (defaults on this page): $100,000 asset, 5 years, 20% salvage, $3,000/yr maintenance, 8% cost of capital gives a factor of 3.99 — buying costs $98,366 in PV versus $105,408 to lease at $2,200/mo, so buying wins by $7,041.
- Your discount rate decides the answer. A high cost of capital favours leasing, because paying $100,000 today means giving up whatever that capital would have earned.
- Salvage value is only worth its discounted amount: $20,000 recovered in 5 years at 8% is worth $13,612 today, not $20,000.
Under the hood
The math, fully exposed
Both paths are converted to present value at your cost of capital, then compared:
Annuity PV factor = (1 − (1 + r) −N) ÷ r
Buy cost (PV) = price + (maintenance × factor) − salvage ÷ (1 + r) N
Lease cost (PV) = annual lease × factor
Decision = whichever present value is lower
- Why present value: spreading payments over years is worth something. The discount rate prices that delay, so a $100k purchase today and $26k/year of lease aren't compared at face value — they're compared in today's dollars.
- Salvage only counts if you own: the resale value is recovered years out, so we discount it back. The higher it is, the more buying pulls ahead.
- Cash velocity is real: leasing keeps the purchase price in your business. If you can put that capital to work above your discount rate, leasing can win even when its sticker cost looks higher.
Your directives
What to do next, based on your numbers
Adjust the sliders to generate tailored recommendations.
Answers
Frequently asked questions
What is the difference between CapEx and OpEx?
A capital expenditure (CapEx) is a large upfront purchase of an asset you own and depreciate over time — buying equipment outright. An operating expense (OpEx) is a recurring cost for using something you don't own — leasing or subscribing. CapEx ties up cash now for a lower long-run cost; OpEx preserves cash and spreads the cost out.
When does leasing (OpEx) beat buying (CapEx)?
Leasing tends to win when the asset depreciates fast or becomes obsolete quickly, when you have better uses for the capital than the asset itself, or when your cost of capital is high. Buying tends to win when the asset holds value (high salvage), you'll use it for its full life, and you have idle cash earning little.
Why does this calculator use a discount rate?
A dollar spent today is worth more than a dollar spent in five years, and capital tied up in an asset can't be deployed elsewhere. The discount rate (your cost of capital) converts all future lease payments, maintenance and salvage into today's dollars so the two paths are compared fairly — this is the "cash velocity" effect.
What is salvage value and why does it matter?
Salvage value is what the asset is worth when your analysis period ends — its resale or trade-in value. Because you only recover it if you own the asset, a high salvage value tilts the decision toward buying. We discount it back to present value since you receive it years from now.