How do you calculate whether it is cheaper to buy or hire a tool?

To compare buying versus hiring, add up all the costs of ownership over the period you plan to use the tool: purchase price, ongoing maintenance, storage, and insurance, then subtract any resale value at the end. Divide that total by the number of times you will use the tool to get your cost per use. For hiring, your cost per use is simply the hire rate. If your cost per use when buying is lower than the hire rate, buying is the better value. The break-even point is the number of uses at which the total cost of buying equals the total cost of hiring.

What costs should I include when deciding whether to buy a tool?

When calculating the true cost of buying a tool, include the purchase price (including delivery or freight), any consumables or accessories needed to use it, annual maintenance costs (sharpening, servicing, replacement parts), storage costs if you need to buy a shed or cabinet, insurance if applicable, and the opportunity cost of the capital tied up in the purchase. On the benefit side, deduct the expected resale or salvage value at the end of its useful life. Hiring avoids all these ownership costs but typically costs more per use.

What is a reasonable salvage value to assume for tools and equipment?

Salvage value depends heavily on the tool type, brand, and condition. General-purpose power tools (drills, circular saws) from reputable brands often retain 20 to 40 percent of their purchase price after several years if kept in good condition. Specialist or heavy equipment depreciates faster and may be worth 10 to 20 percent of cost after five years. Consumable tooling (blades, bits, abrasives) has zero salvage value. For this calculator, if you are unsure, use 20 percent of the purchase price as a conservative estimate.

Buy vs Hire Tools and Equipment Calculator NZ

This calculator works out whether it is cheaper to buy or hire a tool or piece of equipment, using a full cost-of-ownership comparison, not just the headline hire rate. You enter the purchase price including GST, the annual maintenance cost such as servicing or blades, any annual storage cost, and the resale or salvage value you expect at the end of the period. On the hire side, you enter the hire rate per use, how many times a year you expect to use it, and the number of years you want to compare over. The calculator returns the total cost to buy and the total cost to hire over that period, your effective cost per use if you buy, and the break-even number of uses at which buying becomes the cheaper option. A detailed breakdown shows the buy-side workings, including gross ownership cost and net cost after salvage value, alongside the matching hire-side figures, plus a year-by-year table showing which option is cheaper as usage builds up. A verdict box then summarises which option wins for your inputs and by how much. Use it before any purchase decision on tools, machinery, or equipment you only need occasionally, to see past the sticker price and weigh up paying up front against paying per use. The results are indicative estimates, as actual maintenance, storage, and resale values will vary.

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Updated Standard buy-versus-hire cost comparison model.

1. Buying Costs

Purchase price (incl. GST)

Annual maintenance cost (servicing, parts, blades)

Annual storage cost (shed, cabinet, space)

Expected salvage / resale value (at end of period)

2. Hiring and Usage

Hire rate per use (half-day or daily rate)

Uses per year

Comparison period

Cost Comparison Results

Total Cost to Buy

$770

over 3 years

Total Cost to Hire

$1,080

over 3 years

Cost Per Use (Buy)

$64.17

effective cost per use

Break-Even Uses

9 uses

total uses for buying to win

Buy Option Breakdown

Purchase price$800.00

Maintenance over period$120.00

Storage over period$0.00

Gross ownership cost$920.00

Less: salvage value-$150.00

Net cost to own$770.00

Total uses over period12 uses

Effective cost per use$64.17 per use

Hire Option Breakdown

Hire rate per use$90.00

Uses per year4 times

Total uses over period12 uses

Total hire cost$1,080.00

Cost per use (hire)$90.00 per use

Break-even number of uses9 uses total

Break-even uses per year2.9 uses/year

Cumulative Cost Over Time

Year	Cumulative Buy Cost	Cumulative Hire Cost	Cheaper Option

Summary: Enter your costs above to see the result.

How the Buy vs Hire Comparison Works

The comparison compares the total cost of ownership against the total cost of hiring over a set period. The buy cost is the purchase price plus cumulative maintenance and storage costs, minus the expected resale value at the end of the period. The hire cost is simply the hire rate multiplied by the number of times you use the equipment.

The Formula

Net buy cost = Purchase price + (Annual maintenance x years) + (Annual storage x years) - Salvage value

Net hire cost = Hire rate per use x uses per year x years

Cost per use (buy) = Net buy cost / (uses per year x years)

Break-even uses = Net buy cost / Hire rate per use

At the break-even number of uses, the two options cost exactly the same. Below that threshold, hiring is cheaper. Above it, buying is cheaper.

Worked Example

A scaffold tower hire costs $90 per use. Buying one costs $800 with $40 per year in maintenance and an expected resale value of $150 after 3 years. You plan to use it 4 times per year.

Item	Buy	Hire
Initial outlay	$800	$0
Maintenance (3 years)	$120	$0
Storage (3 years)	$0	$0
Gross cost	$920	$1,080
Less salvage value	-$150	-
Net cost over 3 years (12 uses)	$770	$1,080
Cost per use	$64.17	$90.00

Break-even point: $770 / $90 = 8.6 uses. After 9 uses total, buying is the cheaper option. At 4 uses per year, you reach break-even partway through year 3. The calculator confirms buying saves $310.00 over the 3-year period.

When to Buy

You use the tool frequently (monthly or more)
The tool will hold its value reasonably well
Having it on hand saves time or avoids delays to a project
The hire rate is high relative to the purchase price
You need it for precision or familiarity (your own calibrated tool)

When to Hire

You use it only once or twice a year
The tool is large, heavy, or difficult to store
Technology changes fast and the tool may be obsolete in a few years
The purchase price is very high relative to the hire rate
Maintenance or calibration would be complex or costly
You only need it for a single project

Hidden Costs to Consider

When buying, do not overlook freight and delivery costs, the cost of accessories or consumables (blades, bits, safety gear), the time spent on maintenance and servicing, insurance, and the space the tool takes up. When hiring, factor in transport to and from the hire depot and any damage waiver or bond costs that the hire company may charge.

Related Calculators

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Depreciation Calculator: work out the annual depreciation on equipment you own.
Break-Even Calculator: find the point at which revenue covers total costs.
Cost Per Use Calculator: calculate the effective cost per use of any item.
Appliance Running Cost Calculator: estimate the electricity cost of running tools and appliances.

Method: Standard break-even and total cost of ownership comparison. Net buy cost = Purchase price + (Annual maintenance x years) + (Annual storage x years) - Salvage value. Break-even uses = Net buy cost / Hire rate per use. All figures are nominal (not inflation-adjusted) and are indicative only. Actual hire rates, maintenance costs, and resale values vary by tool type, brand, and market conditions.