Equipment ROI Calculator

Equipment ROI = (total gain − total cost) ÷ total cost × 100. Total gain is monthly savings or profit × months, plus resale value. Total cost is the price plus upkeep. In the example: $90,000 gain minus $56,000 cost is $34,000, divided by $56,000 is 61%.

A good test is the yearly return (IRR): if it beats your borrowing rate or what the cash would earn elsewhere, the purchase adds value. Many businesses want payback within 2 to 3 years for machines that last 5 to 10. The example pays back in 3 years and returns 25.2% a year.

Divide the price by the monthly net gain, which is savings minus upkeep. $50,000 ÷ ($1,500 − $100) is about 36 months. The calculator does this month by month, so it also handles ramp-ups and resale. Payback ignores what happens after, so look at ROI and IRR too.

Buying usually costs less over the full life if you use the equipment for years and can sell it at the end. Leasing keeps cash free, spreads cost evenly and makes upgrades easier. In the example, leasing at $1,100 a month costs $66,000 over 5 years against a $50,000 price. Add your lease quote under More options to compare.

It adds to your gain at the end. A machine you can sell for $10,000 after 5 years lifts the example's ROI from 61% to 79%. Trucks and construction gear often hold 20% to 40% of their value after 5 years. Specialized machines may be worth little. Use a cautious figure.

Labor hours saved at their full hourly cost with taxes and benefits, outside services you no longer buy, fewer defects and less scrap, lower energy or repair bills on the machine it replaces, and gross profit from extra work it lets you take. Don't count savings you won't actually capture, such as hours freed with nothing to fill them.

Use the years you expect to keep and use it, often 5 to 10 for machines and 3 to 7 for vehicles and computers. Counting too short a period makes good purchases look bad. The example breaks even over 3 years, returns 61% over 5 and 116% over 7.

If the yearly return beats the loan rate, financing can still leave you ahead, and it keeps cash on hand. The example returns 25.2% a year, well above typical equipment loan rates. Use our business loan calculator to price the payments, then subtract them from the monthly gain here.

Depreciation is an accounting and tax entry, not a cash cost, so it isn't part of this calculation. It can lower your taxes, which improves the real return. Rules such as Section 179 and bonus depreciation change often, so ask a tax professional how they apply to your purchase.

IRR, the internal rate of return, is the yearly return that makes the purchase's costs and gains balance out over time. It accounts for when money comes in, so a machine that pays back fast scores higher than one with the same total gain spread over more years. Compare it with your cost of borrowing.