← Equipment lease buyout calculator
This calculator vs. comparing the buyout price to fair market value
A price below fair market value is not the same question as a price worth paying.
The habit most payoff letters get checked against is fair market value: is the quoted buyout close to, above, or below what the equipment is worth right now? It is the fastest sanity check available — get an appraisal or a comparable listing, compare it to the number on the letter, and decide from the gap.
That check answers one question — is this price close to the equipment's value — and says nothing about how many more months of service that price buys, what a replacement would cost, or how long the replacement would last. This calculator starts from the same payoff letter but converts both paths to cost per month of use: the buyout price against the useful life you have left, and a replacement's cost against its own expected life, plus optional removal and downtime costs. A buyout can price well under fair market value and still be the more expensive path per month, and a buyout priced above fair market value can still be the cheaper one.
| Question | Where to answer it |
|---|---|
| Is this buyout price reasonable next to what the equipment is worth right now? | Comparing it to a fair-market-value estimate — a useful sanity check on the price alone. |
| Is paying the buyout actually the cheaper path once remaining life and a real replacement enter the picture? | This calculator — it converts both paths to cost per month of use and reports the cheaper one. |
| What buyout price would make the two paths cost the same per month? | This calculator's break-even buyout price — the number worth negotiating against, not the fair-market-value estimate. |
| What does removal, downtime, or a replacement's all-in cost do to the decision? | This calculator — both have their own fields rather than being folded into a headline price. |
A bargain that is not one
Using this calculator's own figures: an $8,000 buyout quoted against equipment appraised at $10,000 fair market value — 20% below FMV, a number most people would read as settled — on equipment with 6 months of useful life left, compared against a $15,000 replacement good for 60 months. The buyout costs $1,333.33 per month to keep; the replacement costs $250.00 per month. Despite pricing well under fair market value, the buyout is the more expensive path by 5.33 times per month, and keeping the leased equipment costs $6,500 more over its remaining life than returning it and replacing it. The break-even buyout price here is $1,500 — over five times below the $8,000 actually quoted.
Common questions
Why can a buyout below fair market value still be the wrong deal?
Because fair market value prices the equipment, not the months of use you are actually buying. A buyout below FMV looks like a bargain on the payoff letter, but if the equipment only has a few months of useful life left and a replacement would run for years at a similar or lower price, the buyout can cost far more per month of use than walking away and replacing it. Using this calculator's own figures: a $8,000 buyout on equipment appraised at $10,000 fair market value -- 20% below FMV -- with 6 months of useful life left, against a $15,000 replacement good for 60 months, costs $1,333.33 per month to keep versus $250.00 per month to replace. The buyout is the worse deal by 5.33 times per month despite pricing 20% under fair market value.
What does comparing the buyout price to fair market value alone leave out?
Remaining useful life, replacement cost, and how long the replacement would last. Fair market value answers one question -- is this price close to what the equipment is worth right now -- and says nothing about how many more months of service that price buys, what a replacement costs, or how long the replacement lasts. Two buyouts priced identically against fair market value can be opposite decisions once useful life and a replacement's cost and lifespan enter the comparison.
How big is the gap in practice?
Using this calculator's own figures: an $8,000 buyout against a $10,000 fair-market-value estimate reads as a 20% discount, which most people would take as settled. But at 6 months of remaining useful life, that buyout costs $1,333.33 per month to keep. A $15,000 replacement lasting 60 months costs $250.00 per month. Keeping the leased equipment costs $6,500 more over its remaining life than returning it and replacing it -- the break-even buyout price for this comparison is $1,500, over five times below the $8,000 actually quoted.
Is comparing the buyout price to fair market value ever the right check?
It is a reasonable sanity check on the price itself -- a buyout well above fair market value is worth a second look at the lease contract before paying it. What it cannot tell you is whether paying that price is the cheaper path once remaining useful life and a real replacement's cost and lifespan are on the table, and by then a payoff letter is often already close to due.
Does this calculator know my equipment's fair market value or what a replacement costs?
No. It has no appraisal data, no equipment pricing feed, and no knowledge of your lease terms. It takes the buyout price, your own estimate of fair market value, remaining useful life, a replacement's cost and expected life, and optional removal and downtime costs, and converts both paths to cost per month of use -- the arithmetic a fair-market-value comparison skips, not an appraisal.
Open the buyout calculator to check your own payoff letter against a replacement, or read should I buy out my equipment lease?