Buy or rent equipment: compare costs by month

To decide whether to buy or rent equipment, compare both costs over the same use horizon and keep resale assumptions visible. After this guide, you can build a month-by-month worksheet and check where the two calculated costs become equal.

Updated: 29 October 2026. Worked example with hypothetical figures.

Define the equipment job before comparing prices

Choose one equipment requirement and one time horizon. A small production business might need a lighting kit available continuously for a project. Compare ownership and rental only if the equipment provides equivalent useful service. A less capable rental package is not the same offer simply because its monthly price is attractive.

This worksheet compares an outright purchase with a fixed monthly rental. It does not model borrowing, tax treatment, investment returns or the time value of money. Amounts are nominal: a payment today and a payment later are added without discounting. That makes the exercise easy to repeat, but deliberately narrower than a complete financial appraisal.

The US Small Business Administration starts its equipment guidance with identifying the assets a business needs before considering acquisition methods. We use that planning principle, not its US accounting or tax rules. If the equipment requirement itself is uncertain, first review your small-business cost reduction plan. Removing an unnecessary purchase is a different decision from choosing how to acquire a necessary item.

Collect five inputs and name the assumptions

Record purchase price, monthly rental, recurring ownership storage and upkeep, months of use and expected resale proceeds at the chosen exit date. In this exercise, residual value means an assumed cash receipt from selling the owned equipment. It does not mean an accounting carrying value or a guaranteed offer from a buyer.

All amounts use one illustrative currency. This is a worked example with hypothetical figures, not a current market quote, Anar client case or observed saving. For the algebra exercise only, assumed resale proceeds remain 600 at every independently selected exit date. That is not a prediction that equipment value stays constant over time.

We also assume no rental extras, entry or termination charges, selling fees or additional ownership costs beyond the monthly 30. Rental payments end at the selected horizon. If any assumption does not match a real offer, amend the model before relying on it. An unknown charge belongs in an unresolved field, not a zero-value cell.

Separate purchase cash outflow from net comparison cost

Rental cost is months multiplied by monthly rent. Purchase cash outflow is the upfront price plus recurring ownership costs during the same months. If your scenario ends with a sale, subtract the assumed resale receipt once to calculate net ownership cost over the horizon. Do not subtract it from each monthly payment.

Rental cost = months × monthly rent
Purchase cash outflow = purchase price + months × monthly ownership cost
Net ownership cost = purchase cash outflow − resale proceeds

At six months, rental costs 6 × 180 = 1,080. Buying requires 2,400 + 6 × 30 = 2,580 in payments. If the equipment is then sold for the assumed 600, net ownership cost becomes 1,980. Rental is lower by 900 in that scenario.

At 24 months, rental costs 4,320. Purchase cash outflow reaches 3,120, with net ownership cost of 2,520 after the hypothetical sale. Keep both purchase figures visible. The resale receipt cannot fund the initial purchase because it occurs at exit, and it may never occur if you keep the equipment. Use your cash flow plan to check the payment dates separately.

Read the month-by-month comparison correctly

Each row below is an independent exit scenario. It assumes the same 600 resale receipt at that row's end. The net ownership column is not a monthly bill and does not describe how much cash you need on day one. That distinction prevents a favorable net total from disguising a large upfront payment.

Set your use horizon before reading the result. If you only need six months of service, the 24-month row does not justify buying. Extending the assumed requirement just to make the preferred option win changes the question rather than answering it.

After acquisition, keeping track of custody and readiness is another task. The equipment checkout register helps record those events, but it does not calculate acquisition costs. Keep an operational equipment record and this decision worksheet linked without treating either as evidence that the other has been completed.

When do the two costs become equal?

Set the two example costs equal: 2,400 + 30m − 600 = 180m, where m is the number of months. Rearranging gives 1,800 = 150m. The equality point is 12 months. At month 11, rental remains lower. At month 12, the net comparison costs tie. At month 13, ownership is lower under the same resale assumption.

Crossover months = (purchase price − resale assumption)
                   / (monthly rent − monthly ownership cost)

Use this form only when the denominator is positive and the inputs remain constant over the horizon. If monthly rent equals monthly ownership cost, division by zero does not produce a meaningful threshold. If rent is lower, the familiar argument that buying becomes cheaper with more months does not follow. Compare the actual cost expressions instead.

For a fractional result, calculate the neighboring whole months and apply the rental agreement's billing rules. A monthly tariff cannot automatically be divided into a daily rate. Minimum terms, early-return charges and price changes can also invalidate the simple straight-line model. The threshold is a conditional calculation, not a promise that a rental company will accept the assumed exit.

Test the resale assumption before choosing an option

Resale proceeds are uncertain, so test more than one value. Keeping the other example inputs fixed, zero resale gives a 16-month crossover. A resale assumption of 300 gives 14 months; 600 gives 12 months; and 900 gives 10 months. These are scenarios, not estimates of market demand for the equipment.

Consider a 13-month requirement. With resale at 600, net ownership costs 2,190 and rental costs 2,340. With resale at zero, ownership costs 2,790 and rental stays at 2,340. The preferred cost option reverses. A decision record that omits the resale assumption would hide the reason for the recommendation.

For real equipment, investigate comparable model, age and condition before selecting an exit value. Deduct selling charges if they apply. The Australian government's equipment guide highlights maintenance responsibilities and obligations that can remain when use ends. Those are prompts to inspect your actual agreement, not universal terms for every rental.

Put unresolved assumptions in a business risk record. If resale changes with each exit date, enter a separate value for each month and recalculate each row. A single constant-value crossover formula is no longer an adequate description of that model.

Save a worksheet another person can reproduce

Open an existing desktop installation of Excel and choose Blank workbook. Label A1:A4 Purchase, Monthly rent, Monthly ownership cost and Resale assumption. Enter 2400, 180, 30 and 600 in B1:B4. Label A6:D6 Months, Purchase cash outflow, Net ownership and Rental. Enter 6, 12, 24 and 13 in A7:A10. For each line below, select the named cell, type only the formula beginning with = and press Enter; do not type the B7 cell label. Select B7:D7 and press Ctrl+C, then select B8:D10 and press Ctrl+V. Dollar signs fix the input references while the month reference changes for each row.

B7 =$B$1+A7*$B$3
C7 =B7-$B$4
D7 =A7*$B$2

Check months 6, 12 and 24 against the table. Column C should show 1,980, 2,160 and 2,520. Then set B4 to zero and check that the 13-month result reverses. These checks establish that your sheet follows the stated arithmetic; they do not establish whether the resale value is realistic.

Budget five minutes each for inputs, formulas and final checks; this is a planning target, not measured completion time. After testing zero resale, restore B4 to 600. In A12 write “13 months; resale assumption 600; ownership 2190, rental 2340; zero resale reverses the preference.” In A13 record the date, hypothetical input source and open questions; later link this record to your decision log. Choose File → Save As and save equipment-comparison.xlsx in Documents. If the name exists, choose another rather than overwrite it. Close the workbook and reopen that saved file from Documents. Check B4 is 600, C7:C10 show 1980, 2160, 2520 and 2190, formulas remain in the formula bar, and A12:A13 retain your notes. Until you perform this readback, do not label the saved file verified.