Dental Equipment Lease vs Buy

Dental equipment is expensive, and the decision to lease or buy affects both cash flow and taxes. Buying with a loan lets you deduct the full cost right away in many cases. Leasing spreads both the cost and the deductions over time. This calculator compares the after-tax cost of each in today's dollars.

What this calculator does

Enter the equipment price, your loan rate and term, whether you'll expense the full cost in year one, the monthly lease payment and term, the buyout at the end of the lease, your combined marginal tax rate and a discount rate. The calculator shows:

• which option has the lower after-tax cost,
• the difference in today's dollars,
• the after-tax cost of buying and of leasing,
• the monthly loan payment, and
• the tax savings in year one if you buy.

The formula in plain English

Buy: add up the loan payments, each discounted to today. Then subtract the tax savings, also discounted, from:

• depreciation: the full price in year 1 if you expense it, or the price spread evenly over 7 years if you don't, and
• loan interest, deducted in the year you pay it.

Lease: add up each lease payment after its tax deduction, which is payment × (1 − tax rate), discounted to today, plus the discounted buyout at the end.

The option with the lower total costs less in today's dollars.

A worked example

Dr. Walsh is buying $120,000 of equipment. A loan is 7.5% for 60 months, and she'd expense the full cost in year 1. The lease option is $2,450 a month for 60 months, with a $1 buyout. Her combined tax rate is 40%, and she uses a 6% discount rate.

• Loan payment: about $2,405 a month.
• Year-1 tax savings if she buys: about $51,300 (the full price plus first-year interest, × 40%).
• After-tax cost to buy: about $70,700 in today's dollars.
• After-tax cost to lease: about $76,000.
• Buying costs about $5,400 less.

The big first-year deduction is what makes buying win here. If she couldn't use a large deduction this year, or if the lease included service she'd otherwise pay for, the answer could change.

Why it matters at each career stage

If you're: Practice owner

Talk to your CPA before year-end about large purchases. Timing equipment purchases can make a big difference to your tax bill, and Section 179 and bonus depreciation have different rules. Make sure the purchase makes sense for the practice first; the tax deduction is a bonus.

If you're: Employed

If you're starting or buying a practice, equipment financing will be part of your plan. Use this alongside the startup and acquisition calculators to see your full monthly costs.

Things to compare beyond cost

Service and warranties. Some leases include maintenance. Add its value to the buy side if you'd pay for it separately.

Upgrades. Technology like CBCT units or scanners changes quickly. A lease can make upgrading easier.

Ownership at the end. With a fair-market-value lease, you'll pay much more to keep the equipment.

Cash flow. Lease payments are often lower in the early months, which can help a new practice.

A note on taxes

This calculator uses simplified tax treatment. Real depreciation follows IRS schedules, state rules differ, and whether a lease counts as a lease or a purchase for taxes depends on its terms. Use these results to frame a conversation with your CPA, not as a final answer.

Next, see what new technology could earn with the technology ROI calculator, plan a startup office, or plan your tax payments with the quarterly estimated tax calculator.