If you’ve leased equipment for your business, you’ll want to track ROI on an equipment lease to ensure the decision is truly paying off. Whether you’re in manufacturing, construction, or a small business setting, knowing how to measure the return on your lease will help you make smarter choices, future-proof your operations, and justify your investment.
In this article we’ll walk through what “return on investment” really means when you lease equipment, the key metrics you’ll need, how to set up your tracking system, common pitfalls to avoid, and a practical template you can use. You’ll come away fully equipped to monitor, evaluate, and improve your equipment leasing decisions.
It helps you verify that your lease is delivering value rather than being a cost drain.
It gives you actionable insights into which leased assets are high-performing and which aren’t.
It enables smarter budgeting and forecasting decisions (should you renew, upgrade, or return?).
It supports proactive decision-making: you’ll know when to negotiate, switch lease terms, or invest in other assets.
Leasing equipment is different from buying: the cash-flow profile is different, the risk of obsolescence may be lower, you may avoid resale hassles, and tax/deduction treatments may vary. For example, leasing can improve cash flow and reduce residual-value risk.
Because of these differences, tracking ROI for a lease requires a slightly different approach than for outright ownership.
At its core, ROI = (Gain from investment – Cost of investment) ÷ Cost of investment.
For equipment leases, you’ll apply this but tailor “gain” and “cost” to reflect leasing specifics.
Cost of investment (C): For a lease, this includes all lease payments over the term, plus any associated costs (maintenance, insurance, downtime, return costs).
Gain from investment (P): The incremental benefit you receive from using the leased equipment. It may include increased revenue, cost savings, improved efficiency, lower downtime, or enabling new business opportunities. Crestmont Capital
Expressed as a percentage: ROI × 100%.
Because leases often involve benefits like cash-flow flexibility, reduced obsolescence risk, or tax advantages (especially in an operating lease), simply comparing payments vs revenue may miss the bigger picture.
Thus our tracking must integrate qualitative and quantitative factors.
Here’s how to set up a robust mechanism to track ROI on an equipment lease.
Confirm the lease start date, duration, monthly or quarterly payment schedule.
Establish a baseline “business as usual” scenario if you DIDN’T lease the equipment (what would costs/revenue be?).
Determine the key KPIs (Key Performance Indicators) you’ll monitor: revenue, units produced, downtime, maintenance cost, uptime percentage, cost per unit, etc.
Include:
Lease payments (monthly/quarterly).
Delivery, installation, training, and setup costs.
Maintenance, insurance, utilities specific to the leased asset.
Downtime costs when equipment isn’t operational.
End-of-lease return or disposal costs (if applicable).
Opportunity cost (e.g., capital tied up elsewhere).
Many sources highlight that ignoring supplementary costs leads to underestimating the “C” side of ROI.
Include:
Additional revenue attributable to the equipment.
Cost savings (e.g., less maintenance compared to old equipment, lower energy consumption).
Improved productivity, units produced, uptime, speed.
Avoided obsolescence: maybe you can upgrade sooner because you leased.
Tax benefits or cash-flow advantages of leasing.
This helps properly quantify “P” in the ROI formula.
Decide on how often you’ll review the ROI: monthly, quarterly, annually. A more frequent check gives you agility to act if ROI is underperforming.
Suggested columns:
| Period | Lease Payment | Additional Revenue | Cost Savings | Other Benefits | Total Gain | Total Cost | ROI (%) |
|---|
Populate for each period and cumulatively to see trends.
Look up the lease term, payment schedule, any residual or buy-out option, penalties for early termination.
What would your business look like if you didn’t lease this equipment? For example: older equipment might mean lower output or higher downtime.
Every period record the actual lease payment.
Record actual incremental revenue and savings tied to the equipment.
Record actual costs: maintenance, downtime, insurance, return costs.
Using the basic formula:
ROI=Total Gain−Total CostTotal CostROI = \frac{\text{Total Gain} - \text{Total Cost}}{\text{Total Cost}}ROI=Total CostTotal Gain−Total Cost
Example: if extra revenue + cost savings = $30,000 in year 1 and the total cost (payments + other costs) = $20,000 → ROI = (30 000 – 20 000)/20 000 = 50%.
Often the full benefit of equipment shows over multiple periods. Tracking cumulatively (year 1, year 2 etc) gives better insight.
What ROI percentage is acceptable for your business? Compare with other assets, industry norms, or your required rate of return.
Don’t ignore qualitative factors such as improved employee morale, fewer breakdowns, faster delivery times. These often precede financial gains.
If ROI falls short of expectation, you may:
Negotiate lease terms, swap or upgrade equipment.
Better optimize usage (longer hours, more output).
Avoid early termination costs by recalculating buy-out options.
Regular reviews help fine-tune your strategy.
A basic ROI calculation above doesn’t account for the time value of money (i.e., $1 today ≠ $1 in two years). For long lease terms, consider discounting cash flows or using NPV/IRR approaches. TapGoods
With a lease you often avoid having to sell equipment at end-of-life or worry about resale value. That is a benefit, but you must account for upgrade/replacement risk. mhccna.com
Watch out for: penalties, early return fees, maintenance not covered by lease, downtime, training and transition costs. These can erode the ROI.
Be careful when attributing gains solely to the leased equipment. Sometimes other factors (market growth, staff improvements) drive revenue. Use control groups or baseline data to isolate impact.
Leases can be operating or finance (capital) leases, and the accounting treatment may affect your cost side.
You might also get tax deductions—make sure you factor those in.
Your plant leases a new CNC machine for 5 years. Lease payments: $2,000/month. It comes online January 1.
Step 1: Baseline scenario
Old equipment produced 1,000 parts/month at $10/part in revenue = $10,000 revenue. It cost $2,000/month in maintenance.
Step 2: Lease scenario
New machine produces 1,400 parts/month = $14,000 revenue. Maintenance drops to $800/month.
Step 3: Calculate monthly figures
Additional revenue: $4,000
Cost savings: $2,000 – $800 = $1,200
→ Total Gain: $5,200/month
Cost of lease payment: $2,000/month
Other incremental costs: training $200/month amortized, downtime transition cost $300/month amortized.
→ Total Cost: $2,500/month
Step 4: Monthly ROI
(5,200 – 2,500) / 2,500 = 1.08 → 108% monthly ROI (very strong).
Project over year: gain $62,400 – cost $30,000 = $32,400 net → 108% ROI for year 1.
Step 5: Review annually – include downtime/maintenance changes over time, maybe productivity gains taper off.
This demonstrates how the calculation works. Every business will have different numbers and assumptions, and you must track actuals to validate.
Tracking ROI is crucial, but you should also monitor:
Payback period: how long it takes to recover cost of lease (cost ÷ annual gain).
Utilization rate: % time the equipment is active.
Downtime rate: hours out of service / total hours.
Maintenance cost per hour/unit produced.
Cost per unit produced: helps link asset performance to business output.
Residual value avoidance: savings incurred by avoiding equipment disposal or resale hassles.
Monitoring these gives deeper insight into equipment performance and leasing efficiency.
Use spreadsheets or business intelligence dashboards to automate data collection and calculation.
Many equipment-leasing companies provide ROI calculators or tools. For example, some firms provide “lease vs buy” calculators.
Integrate with your ERP or asset management system so actual usage, downtime, maintenance data feeds automatically.
Build reports that compare planned vs actual for the lease term and refresh quarterly.
Benchmark against industry data where available to gauge if your ROI is competitive.
Renewing or upgrading a lease: If ROI is high and continuing use makes sense, you might negotiate favorable renewal or upgrade terms.
Returning equipment early: If ROI is low, costs are rising or usage dropping, early return might save money (but check penalty clauses).
Switching to ownership: If the leased equipment is still highly efficient after the term, owning might instead yield better ROI.
Using ROI to justify investment: ROI tracking helps communicate to stakeholders that leasing is a valid investment with quantifiable benefits.
Optimizing usage: If ROI is lower than expected, inspect utilization, downtime, maintenance, operator training to improve it.
Q: What is a good ROI for equipment lease?
A: It depends on your business, industry and risk profile. Many businesses look for 15-30% annual ROI on fixed assets. If you’re getting 50%+ it’s excellent; under 10% may signal issues.
Q: Should I include tax benefits in ROI calculation?
A: Yes—if lease payments are tax-deductible or you save depreciation expense, include the after-tax effect in your “gain” side.
Q: Does ROI replace payback period or NPV?
A: Not fully. ROI shows efficiency of investment. Payback shows recovery time. NPV/IRR incorporate cash‐flow timing and time value of money. Use all three for full evaluation. TapGoods
Q: How often should I update ROI tracking?
A: Monthly or quarterly is ideal. At minimum annually—but more frequent tracking offers better agility.
Q: Can I track ROI for a mixed leased/owned equipment portfolio?
A: Yes. Use consistent metrics across both. For leased equipment you’ll focus on payments + usage; for owned you’ll include depreciation, resale value, maintenance, etc.
List all leases in your equipment portfolio with start date, term, payment schedule.
Identify baseline scenario (what happens without lease).
Define KPIs: revenue, output, downtime, maintenance cost, utilization.
Build spreadsheet/dashboard (see sample above).
Collect actual data monthly (or quarterly) for lease payments, usage, revenue, maintenance cost, other costs.
Calculate ROI each period: (Gain – Cost)/Cost.
Review results and compare to target ROI.
Decide action: continue, upgrade, return, change usage.
Document and share findings with relevant stakeholders.
Tracking ROI on an equipment lease is more than just checking your monthly payment. It means building a comprehensive framework that captures all costs, all gains, monitors key metrics, and allows for strategic decision-making. By applying the steps above—defining your baseline, setting up tracking, calculating ROI regularly, and using the insights to guide your leasing choices—you’ll make your equipment leasing work harder for your business.
Build your tracking spreadsheet today.
Populate the first month’s data and calculate your first ROI.
Schedule quarterly reviews of your equipment leases.
Use your ROI findings to make decisions: continue, upgrade, or return.
By doing this, you’ll be well-positioned to maximize the value of your leased assets and steer your business toward stronger, data-driven outcomes.
If you’re ready to implement an ROI tracking system or want help choosing the right lease terms for optimal ROI, let’s talk.