Office Lease vs Ownership Cash Cost Calculator

How the office lease vs ownership cash cost calculator works

Purchase debt equals purchase price less cash down payment. The fixed monthly loan uses the declared monthly amortization convention and its actual payments are grouped into years. Lease cash starts at the entered first-year amount and compounds the entered increase from year 2. Each ownership year includes the constant entered operating cost.

Down payment and buying costs occur at time zero. In the final year, sale cash less the entered percentage selling cost and remaining loan balance reduces ownership outflow. The two cash schedules use the same horizon and discount rate, with future amounts at year end. Each present amount rounds to cents before the totals are compared.

Exit sale value, operating costs and escalation are assumptions. Tax, lease-accounting rules, rent-free months, changing occupancy, refurbishment and transaction eligibility are excluded. The lower modeled present cash cost is a limited comparison rather than a property valuation or recommendation.

Worked example

An all-cash 100,000 purchase with 2,000 buying costs, 5,000 annual ownership cost for three years and a 100,000 exit sale less 2% selling cost has zero-rate ownership cost of 19,000. Three lease payments of 12,000 cost 36,000, a 17,000 difference. Raising annual lease cash to 14,000 raises its present cost to 42,000.

Sources and assumptions

The source material explains the underlying calculation or pricing structure. Entered prices, costs, schedules and scenario choices are your assumptions; this tool does not obtain supplier quotes or predict actual results.

• NIST: building life-cycle cost analysis
• Microsoft: fixed periodic payment convention