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ROI / Payback: Buy vs Rent vs Rent-to-Purchase

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ROI / Payback: Buy vs Rent vs Rent-to-Purchase

Estimate monthly cashflow, payback time, and NPV across three acquisition paths. All figures are rough-order estimates.

Monthly Benefits (when in use)

Recurring Monthly Costs

Scenario A — Buy

Scenario B — Rent

Scenario C — Rent-to-Purchase (R2P)

Disclaimer: This tool provides directional estimates only and is not financial advice. Taxes, financing, and compliance costs are not included unless you add them in “Other” fields.

How to Use the ROI / Payback Calculator

This tool compares three acquisition paths for a machine—Buy, Rent, and Rent-to-Purchase (R2P)—and estimates cashflow, payback time, and NPV (net present value). It’s designed for quick, engineering-grade decision support.

Quick Start

  1. Set scope: Choose Analysis Horizon (months) and your Discount Rate (annual).
  2. Utilization: Enter the number of months per year you expect to use the machine (e.g., 9 if it’s seasonal).
  3. Monthly benefits (when in use): Add savings from scrap reduction, labor deltas, and throughput/revenue. Add any other recurring benefit in “Other.”
  4. Recurring costs: Enter average monthly maintenance, energy/consumables, and any other costs.
  5. Scenario A — Buy: Enter purchase price, one-time setup/install, and expected resale value at the end of the horizon.
  6. Scenario B — Rent: Enter monthly rent, any setup/delivery, and whether maintenance is included.
  7. Scenario C — R2P: Enter monthly rent, months renting before buy, rent credit %, purchase price at conversion, and resale value.
  8. Calculate: Click Calculate (auto-calculates after edits). Compare the three cards: Total Cashflow, NPV, IRR, and Payback (months).
  9. Export: Use Copy Summary to RFQ to attach structured JSON to your quote or save for internal review.

Inputs & Definitions

Analysis Horizon
Months to model (e.g., 36).
Discount Rate
Annual rate (%). Converted to an effective monthly rate for NPV/IRR.
Utilization (mo/yr)
Months per year the machine is used; benefits scale by this factor.
Monthly Benefits
Savings/uplift when in use: scrap, labor, throughput, other.
Recurring Costs
Maintenance, energy/consumables, other. Applied every month.
Purchase Price / Setup
CapEx + one-time install costs at month 0 (Buy) or at conversion (R2P).
Resale Value
Expected value at the end of the horizon (Buy & R2P).
Rent & R2P
Monthly rent, months renting before buy, and rent credit % toward purchase.

What the Tool Calculates

  • Total Cashflow (undiscounted): Sum of monthly net cashflows across the horizon.
  • NPV: Discounted value of cashflows using your monthly rate derived from the annual discount rate.
  • IRR: Internal Rate of Return (monthly, shown annualized).
  • Payback (months): First month where cumulative cashflow ≥ 0.
  • Notes: Scenario-specific assumptions (e.g., maintenance included in rent).

Example Workflow (Typical Use)

  1. Set horizon to 36 months and discount rate to 10% annual.
  2. Utilization at 9 months/year (seasonal production).
  3. Benefits when in use: $4,000 scrap reduction, $3,000 labor delta, $6,000 throughput uplift.
  4. Recurring costs: $1,200 maintenance, $800 energy, $0 other.
  5. Buy: price $150,000, setup $5,000, resale $60,000.
  6. Rent: monthly $6,000, setup $2,500, maintenance included.
  7. R2P: monthly $6,500, rent 6 months, credit 70%, conversion price $150,000, resale $60,000.

Interpretation: Compare which card shows the highest NPV and reasonable payback. If R2P yields similar NPV to Buy but with less month-0 cash, it may be the most capital-efficient path.

  • Monthly discount rate: \( r_m = (1 + r_{annual})^{1/12} - 1 \)
  • NPV: \( \text{NPV} = \sum_{t=0}^{T} \dfrac{CF_t}{(1 + r_m)^t} \)
  • IRR: Rate where NPV = 0 (computed numerically); displayed annualized as \( (1 + r_m)^{12} - 1 \).
  • Payback: First month where cumulative cashflow ≥ 0 (undiscounted).
  • Utilization scaling: Benefits apply only when the machine is used; monthly benefits are multiplied by Utilization/12.
  • Resale value: Added as a positive cashflow in the final month for Buy and R2P.
  • Maintenance in Rent: If checked, maintenance is not double-counted in recurring costs during rent months.

Taxes, financing interest, depreciation, and compliance costs are excluded unless you add them into the “Other” fields or adjust monthly costs accordingly.

  • Be conservative with benefits. Use historical scrap data and realistic labor/throughput gains.
  • Stress test scenarios. Change utilization, rent credit %, or resale value to see sensitivity.
  • Seasonality matters. If production is intermittent, reduce utilization instead of lowering monthly benefits.
  • Include energy & consumables. Film, labels, and compressed air costs add up—don’t omit them.
  • Document your assumptions. Use the RFQ JSON to share inputs internally and with SIGMA sales.

The tool saves your inputs locally in your browser (localStorage) so you can revisit without retyping.

  • No results? Click Calculate. If still blank, check that numeric fields don’t contain text or commas.
  • Negative or “n/a” IRR? This can happen when cashflows don’t cross zero or are highly irregular—use NPV and Payback instead.
  • Strange payback month? Payback uses undiscounted cashflows. Use NPV for time-value-of-money comparisons.
  • Reset everything: Click Reset to clear inputs and local storage.

If your scenario requires financing terms (interest, down payment), add them as monthly Other Costs or adjust Purchase Price and Setup to reflect cash timing.

What’s the difference between NPV and IRR?

NPV expresses value in currency using your discount rate. IRR is the implied return rate where NPV equals zero. When in doubt, favor the option with the higher NPV within your horizon.

How is utilization applied?

Benefits are multiplied by Utilization/12 each month to reflect seasonal or intermittent use. Recurring costs apply monthly regardless.

Does rent include maintenance?

If checked, the calculator avoids double-counting maintenance during rent months. Uncheck it if your rent excludes maintenance and add maintenance to monthly costs.