Return of preserved capital: how much is it worth not paying everything upfront
Every euro immobilized in equipment is a euro that stops working for the company. We explain how we measure this opportunity cost and why we use the 9.3% from Banco de Portugal.
The invisible cost of immobilizing capital in equipment
Paying for an IT park upfront seems like the cost-free option. There are no interest charges, no rentals, the equipment belongs to the company. But there is a cost. It just doesn't appear on any invoice.
Money immobilized in equipment is no longer available for what the company does best: stock, hiring, marketing, payment terms for customers. In economics, it's called opportunity cost. In practice, it's a simple question: what would this money have done if it weren't sitting idle in laptops?
In our simulator, this component is called the potential return of preserved capital. In this article we explain where the number comes from, how we count it throughout the contract and what it is not.
Quick summary
Capital immobilized in equipment is capital that is not working in the operation.
We use 9.3% per year: the average operational profitability of Portuguese companies, published by Banco de Portugal.
We don't count the total value for the entire contract. The rental payments decrease over time, so the return is calculated on the balance that remains available, with reinvested results also earning returns.
It's not an interest rate or a promise. It's an explicit assumption, always visible next to the result.
Opportunity cost, explained
A company that buys €20,000 worth of equipment on day 1 has no €20,000 in cash on day 1. A company that leases the same equipment pays a monthly rental and keeps that capital available.
The difference is not just accounting. The capital that stayed in the company can be applied to its own operation. And a company's operation has, on average, a measurable return.
That's why comparing only the total rental payments with the purchase price is incomplete: it ignores what the preserved capital did in the meantime.
Why 9.3%?
Banco de Portugal publishes, in the Financial Stability Report, the average operational profitability of Portuguese companies: the operational result (EBITDA) generated by each euro of assets. The most recent value is 9.3% per year.
We chose this number for three reasons.
It's Portuguese. It measures companies like yours, not American averages.
It's public and verifiable. Anyone can confirm the source.
It's operational. It's not the return from a financial product; it's what a euro working within a Portuguese company generates, on average, in a year.
If your company has margins above average, the assumption is conservative. If you have margins below average, it will be generous. That's why the number is always visible next to the result, never hidden within the calculation.
How we count it throughout the contract
It would be easy to exaggerate this component: just assume the total value earns returns throughout the entire contract. But it doesn't. In leasing, rental payments go out month by month, and the preserved capital decreases with them.
That's why we count month by month. The preserved capital starts at the total value of the equipment and gradually decreases until the end of the contract. In each month, only the balance still available is earning returns.
And the results are reinvested: what the capital earns in one month also earns returns in the following months, at the same rate (compound capitalization). This is standard practice in financial evaluation, and any spreadsheet can recalculate it in minutes.
An example
Equipment with a market price of €20,000, in a 36-month contract:
Basis: in each month the balance still available earns returns, with results reinvested.
Calculation: 9.3% per year (0.775% per month) on the available balance, with monthly reinvestment, over 36 months ≈ €3,441.
In our simulator, this value appears as a reduction to the cost of leasing, because it's a gain that the purchase scenario doesn't have. Under the same conditions, the real cost of purchase adds repairs, downtime and management. We explain that part in the article on ownership costs.
What this number is not
It's not a guaranteed interest rate. It's a national average applied as an assumption.
It's not financial advice. The decision about cash flow is yours and your accountant's.
And it's not automatic. It assumes that the preserved capital is actually used in the operation. A company with excess cash sitting idle will earn less from this effect. A company with operations limited by cash flow, like many growing SMEs, will earn more.
Frequently asked questions
Why is the return of preserved capital considered?
By choosing Leasing, the company avoids immediately immobilizing a significant portion of capital in the purchase of equipment. That capital can remain available to finance strategic projects, support cash flow or respond to new growth opportunities.
What investments can generate returns for the company?
The preserved capital can be applied, for example, in customer acquisition campaigns, new product development, entry into new markets, stock increases, process automation or team strengthening. The actual return will always depend on each company's strategy and execution capacity.
What if my company has no way to apply the capital?
In that case, the preserved capital return component will have less relevance in the comparison. The simulator, however, continues to consider other costs associated with the purchase, such as repairs, downtime periods, operational management, loss of productivity and equipment obsolescence.
Is the return shown guaranteed?
No. This is an estimate of the opportunity cost of preserved capital, not a guaranteed return. The objective is to demonstrate the potential value of maintaining liquidity available to invest in company growth, using as reference the rate calculated by Banco de Portugal.
Where can I see this calculation with my numbers?
In the leasing simulator. The return of preserved capital appears as its own component, with the rate and source next to the result.