Lease against buy, compared honestly.
A lease payment is lower than a hire purchase payment on the same asset, and that is not a discount. This page sets out how to compare the two so the deferred value is visible rather than hidden.
Last reviewed 8 September 2026
Indicative repayment
Weekly
$477/week
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
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Your $80,000 scenario
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The comparison
Why the two payments are not comparable as they stand.
Put a hire purchase quote and a lease quote for the same asset side by side and the lease payment will usually be lower. That difference is the single most misread number in asset finance, because it looks like a price and it is a structure.
A hire purchase amortises the full amount financed across the term, so at the end the business owns the asset outright and owes nothing. A lease amortises the amount less a residual set at inception, so at the end a lump sum falls due and the business settles it, refinances it, or hands the asset back. The lower payment is buying the deferral, not a cheaper facility.
Making the comparison honestly means comparing what each costs across the whole life of the asset, including what happens at the end. Where the business will keep the asset, that means adding the residual to the lease and comparing totals. Where it will hand the asset back, the lease is a rental and the honest comparison is against what the asset would have been worth at that point.
Hire purchase repays
The full amount
A lease repays
The amount less residual
What that does
Lowers the payment
What it defers
A decision, and a sum
The two structures
The same $80,000 asset, both ways.
Illustrative on stated assumptions, at an indicative 11% over 48 months, with a residual set at 30% on the lease. Not an offer of credit.
| Hire purchase | Lease with a 30% residual | |
|---|---|---|
| Amount financed | $80,000 | $80,000 |
| Amortised across the term | $80,000 | $56,000 |
| Indicative weekly payment | ~$477 | ~$377 |
| Payments across the term | ~$99,200 | ~$78,400 |
| Due at the end | Nothing | $24,000 residual |
| Total to own the asset | ~$99,200 | ~$102,400 |
| Owned at the end | Yes | Only if the residual is settled |
Illustrative comparison at an indicative 11% over 48 months. Figures rounded, and not an offer of credit.
Reading that table
What the hundred dollars a week is buying.
The lease is roughly $100 a week cheaper across the term and costs slightly more in total to end up owning the same asset. That is the trade in its entirety, and neither side of it is hidden or unfair. The lease is charging for the use of capital that has not been repaid yet, which is exactly what any deferral costs.
What the lower payment genuinely buys is room. A business that cannot comfortably carry $477 a week but can carry $377 has a real reason to prefer the lease, and the extra total cost is the price of making the asset affordable now. That is a legitimate decision rather than a mistake.
The mistake is only made when the residual is not planned for. A business that budgeted for the payment and not for the ending arrives at the end of the term with a lump sum due on an asset it still needs, and refinances it because that is the only option left. Knowing the residual amount and its date at signing keeps all three exits available.
Which fits
Four questions that decide it.
Businesses prioritising ownership and long-run cost typically finance to ownership. Businesses prioritising the monthly figure or replacing on a cycle typically lease. Neither is better in the abstract.
| Feature | Hire purchase | Finance lease | Operating lease |
|---|---|---|---|
| Will the asset be kept past the term | Yes | Possibly | No |
| Who carries the resale risk | The business | At the residual | The financier |
| Depreciation claim ordinarily sits with | The business | Depends on the arrangement | The financier |
| Payment relative to the others | Highest | Lower | Varies, often bundled |
| At the end | Owned outright | A residual falls due | The asset goes back |
Tax treatment in every column is subject to the accountant’s confirmation, because it depends on the specific arrangement and on the accounting basis the business uses.
What it excludes
Four things the figure does not include.
The calculation is a standard amortising schedule on the amount, rate and term entered, and nothing else. Establishment and documentation fees are not in it, and on smaller amounts a fee of a few hundred dollars moves the effective cost more than a percentage point of rate does.
A deposit is not in it either. Where a deposit is being paid, the amount to enter is what is actually being borrowed rather than the price of the asset, and the difference is the most common reason a calculated figure and a quoted one disagree.
GST is not in it. Under a hire purchase the amount financed is normally the GST-exclusive price, with the GST generally claimable in the return covering the period the agreement begins, subject to the accountant’s confirmation of the accounting basis used. Entering a GST-inclusive figure overstates the payment.
A residual or balloon is not in the amortising figure. On a lease or a balloon structure the residual is not repaid across the term, so the real payment is lower than a plain amortising calculation shows and a lump sum falls due at the end. The balloon calculator on this site is the one built for that.
Indicative only
This is a calculation, not a quote.
Nothing here is an offer of credit and no rate shown is available on request. The rate a business is charged is a function of its trading history, the asset, any deposit, the term and the lender’s credit assessment together, and only the lender sees all of those. Every figure this page produces is indicative and based on the inputs shown. Actual rates, fees and repayments are set by the lender after assessment.
References
Sources
- Inland Revenue, GST on hire purchase and leases
Backs the note that the calculator works on the GST-exclusive amount financed under a hire purchase.
- Inland Revenue depreciation rate finder
The published source for the depreciation treatment referred to alongside the figures.
- Reserve Bank of New Zealand, interest rate statistics
Context for why indicative rate bands move over time rather than being fixed figures.
FAQ
Lease against buy, common questions
Is leasing cheaper than buying?
Per week, usually. In total to end up owning the same asset, usually not, because the residual is deferred value carrying interest until it is settled. The lower payment is buying room in the cash position rather than a cheaper facility, which is a legitimate reason to prefer it and a different thing from being cheaper.
Why is the lease payment lower?
Because a residual amount is set at inception and is not repaid across the term, so less is being amortised. On the same asset at the same rate over the same term, a 30% residual removes roughly 30% of the amount from the schedule and the payment falls accordingly.
What happens to the residual at the end?
It is settled from cash, refinanced over a further period, or the asset is returned where the structure allows. Which of those is available depends on the agreement, and which is best depends on whether the asset is still needed and whether the money was set aside. Deciding at signing keeps all three open.
How do I compare the two properly?
Add the residual to the lease and compare the total of all payments plus the residual against the total of all hire purchase payments. Then look separately at what each does to the weekly cash position, because that is frequently the real constraint and it points the other way.
Does the tax treatment differ between them?
It can, and it follows ownership. Under a hire purchase the business is ordinarily treated as the owner and claims depreciation, subject to the accountant’s confirmation. Under an operating lease the financier ordinarily is, and the business claims the rental as an expense instead. A finance lease depends on the specific arrangement. All of this is subject to the accountant’s confirmation.
Is an operating lease the same as renting?
It is close to a long-term rental with a defined term. The financier retains the asset and the resale risk, the business hands it back at the end, and payments sometimes bundle servicing. What distinguishes it from casual hire is the fixed term and the commitment across it.
Can a residual be set to zero?
On a hire purchase there is effectively no residual, which is why it amortises fully. On a lease the residual is set at inception and lenders commonly have ranges they will write within, informed by what the asset is expected to be worth at the end. A residual set unrealistically high makes the payment attractive and the ending expensive.
Which structure suits a business replacing on a cycle?
A lease more often, because the term and the replacement can be made to coincide and the asset goes back rather than needing to be sold. A business that runs assets into the ground more often prefers a hire purchase, because the payments end while the asset keeps working.
Related
Keep exploring
Hire purchase calculator
The full-amortising figure this page compares against.
Read onBalloon payment calculator
The residual on its own, and what settling it costs.
Read onHire purchase against finance lease
The same comparison in detail, including the accounting.
Read onAll structures
Eight ways to finance an asset, compared.
Read on