How to Use the Calculator

The Lease or Buy Calculator is simple to use. To use the calculator:

• Fill out the questionnaire in the relevant section.To know more about a question click on the box at the end of the question. A short definition will appear at the bottom of the screen.
• Click on the "Lease" or "Buy" tab to have the details of the calculations. For each of those sections place the cursor on the heading of each column, a short definition will appear at the bottom of the screen.
• Please note that the calculations will only be made when both the "Lease" and "Buy" sections of the calculator are filled out.
• Use the "Start Over" button to enter new values.
• Click here for printing instructions.
• DO NOT enter the $ and % signs in the boxes, just type in the numbers.
• Use the example button to see the Hewlett Packard example.

Why use the calculator

Leases may offer many advantages to businesses looking to acquire equipment, especially for small and medium sized companies. Among other things, leases allow firms to commit less cash flow and equity to finance their equipment. Although leasing equipment has many advantages, business people should compare the actual costs between leasing and buying before making their decision.

Limitations and financial assumptions

Please note that this calculator, as for most models, simplifies the reality of the decision making process. The Lease or Buy calculator uses the following assumptions to derive its calculations:

• When owned, the equipment is 100% financed through a loan
• The cash flows are discounted at the business' after-tax cost of debt
• At the end of the period, both the leased and owned equipment would be disposed of
• There will be assets left in CCA class upon disposition of the equipment
• Both the lease and the loan have to take place over the same term
• The lease contract must be considered as a lease by Canada Customs and Revenue Agency
• The federal and provincial governments use the same classes and rates for the capital cost allowance deduction

Since there are serious tax limitations when acquiring cars worth more than $26,000 the use of the calculator in this case is not recommended.

Sales Taxes
The Lease or Buy Calculator makes no provision for sales taxes. The Canadian Goods and Services Tax (GST), the Quebec Sales Tax (QST), and the Harmonized Sales Tax (HST), can be considered cost neutral because most businesses can fully claim them when they acquire equipment. The provincial sales taxes (PST) that can not be claimed when acquiring equipment, unlike the QST and the HST, can be capitalized when buying equipment and are also considered as a deductible expense when leasing equipment.

To make this calculator, we have used a programming language called Java. As such, no personal information will leave your computer while you are using this calculator. The Calculator was developed for use with Netscape Navigator version 3.0 and more recent or Internet Explorer version 4.0 or more recent.

This calculator is offered as a service to help you increase your knowledge about various sources of financing for your business. Industry Canada will make every effort to keep the information current. However, before making any important decision based on this information. please consult your own legal or financial advisor.