How the comparison works
Mini excavators hold their value better than most construction equipment — a well-maintained 4-ton machine can retain 40–50% of its purchase price after four years. That residual value is the key variable in a lease-vs-buy comparison: when you buy, you keep that value; when you lease, the lessor keeps it and uses it to set a lower payment.
The calculator converts every cash flow — down payment, loan payments, tax savings from Section 179 or lease deductions, residual proceeds if you sell — into present-value terms so you're comparing like with like. A dollar saved in year 4 is worth less than a dollar saved today.
Example: 4-ton compact excavator at 2026 market pricing
These are the pre-filled defaults. Replace them with your actual quote before making a decision.
| Input | Buy (loan) | FMV lease |
|---|---|---|
| Equipment cost | $55,000 | |
| Down / first payment | $5,500 (10%) | $1,100 |
| Monthly cost | ~$1,220 at 8.5%, 48 mo | $1,100 |
| Term | 48 months (4 years) | |
| Total cash over term | ~$64,060 | $52,800 |
| Machine at end | Own (~$22,000 value) | Return (no asset) |
| Tax deduction method | Section 179 (year 1) | Lease payments (each year) |
The buy option has higher monthly cash outflow but ends with a $22,000 asset and a year-one Section 179 deduction worth $13,750 (at 25% rate). The lease option has lower monthly payments and lower total cash, but no asset at the end. The after-tax NPV depends on your discount rate and when the tax savings arrive — the calculator works it out precisely.
Assumptions and limitations
- Prices vary by configuration. The $55,000 default covers a basic 4-ton (approximately 8,800 lb) compact excavator. Adding a thumb, hydraulic quick coupler, or cab with AC can add $5,000–$12,000. Machines below 2 tons start around $25,000; the 6-ton class exceeds $75,000.
- Mini excavators hold value well. The $22,000 residual (40% of cost after 4 years) reflects the strong used-equipment market for compact excavators. Machines with low hours in good condition sometimes achieve 50%+ resale. If you plan to sell privately, adjust the residual upward.
- Loan term set to 48 months. Four-year terms are common for this price point. If your lender offers 60 months, update the loan term — it lowers the monthly payment but increases total interest.
- State property taxes on owned equipment are not modeled. Some states assess annual personal property tax on business equipment, which can add $500–$2,000/year to the true cost of ownership on a $55,000 machine.
Frequently asked questions
- Is a mini excavator 5-year or 7-year MACRS property?
- Construction equipment is generally 5-year MACRS property under the GDS system. If your CPA classifies your excavator under asset class 00.12 or a specific industry class (e.g., 15.0 for construction), the period may differ. When in doubt, use 5-year MACRS in the calculator and confirm with your CPA.
- How do I find a competitive lease rate?
- Get quotes from at least three sources: the manufacturer's captive lender (Kubota Credit, Cat Financial, Komatsu Financial), your bank or credit union, and a specialty equipment finance company. Manufacturer captives often run promotional rates — sometimes below market — to move new inventory. Credit unions frequently offer the lowest rates for members with strong credit.
- What happens if I want to keep the machine after a FMV lease?
- At the end of an FMV lease, the lessor will offer to sell you the machine at its then-fair market value — usually an appraised or guide-book price. You are not obligated to buy. If you expect to want the machine at the end, a $1-buyout lease (switch the lease type in the calculator) locks in the right to buy for $1 but has higher monthly payments.
Sources
- Associated Equipment Distributors (AED), Construction Equipment Finance Report 2025 (accessed 2026-10-02)
- IRS Rev. Proc. 2025-32: Section 179 limits and bonus depreciation for 2026 (accessed 2026-10-02)
- IRS Publication 946, How To Depreciate Property — MACRS 5-year asset class (accessed 2026-10-02)