Equipment Lease vs Buy Calculator
Compare outright purchase, hire purchase, finance lease and operating lease for business equipment. Includes AIA, Corporation Tax relief and NPV comparison for 2024/25.
Equipment Lease vs Buy Calculator
AIA, Corporation Tax relief, NPV comparison — 2024/25
3–10 years
Equipment finance tips
- AIA year 1 deduction: The Annual Investment Allowance allows 100% deduction in year 1 (up to £1M) — often makes outright purchase or HP the cheapest option if you have available cash.
- Operating leases and balance sheets: Operating leases keep assets off the balance sheet (for SMEs not applying IFRS 16), which can help maintain banking covenant ratios.
- HP vs Finance Lease: HP gives you ownership at the end; Finance Lease gives you the right to use the asset — the lessor retains legal ownership and may sell the asset at the end (with or without a rebate of proceeds to you).
- Replacement cycles: Operating leases make it easier and cheaper to upgrade equipment at the end of the term — important for IT, vehicles, and machinery with fast obsolescence cycles.
- VAT timing: VAT on HP is due upfront on the full asset; on leases it is paid monthly. For VAT-registered businesses the cash difference is recoverable, but the timing matters for cash flow.
AIA and writing down allowances (2024/25)
| Allowance | Rate | Assets |
|---|---|---|
| Annual Investment Allowance (AIA) | 100% year 1 | Most plant & machinery (up to £1M/year) |
| Writing Down Allowance — Main Pool | 18% pa declining balance | General plant and machinery |
| Writing Down Allowance — Special Rate Pool | 6% pa declining balance | Integral features, long-life assets, thermal insulation |
| First Year Allowances (FYA) | 100% year 1 | Zero-emission cars and charging equipment |