Compare equipment financing and leasing to decide which option fits your business needs.
Equipment financing vs leasing: Equipment financing (loan) gives you ownership, equipment serves as collateral, you can claim depreciation, and you own equipment after repayment. Equipment leasing gives you use without ownership, lower monthly payments, ability to upgrade easily, and you return equipment at end of lease. Best for financing: Long-term use, want ownership, want to build equity. Best for leasing: Short-term use, need flexibility, want lower payments, equipment becomes obsolete quickly.
| Factor | Equipment Financing | Equipment Leasing |
|---|---|---|
| Ownership | You own equipment | Lessor owns equipment |
| Monthly Payments | Higher (includes principal) | Lower (rental payments) |
| Total Cost | Lower (own equipment) | Higher (no ownership) |
| Tax Benefits | Depreciation + interest deduction | Lease payments deductible |
| End of Term | Own equipment outright | Return or buyout option |
| Flexibility | Less flexible | More flexible (upgrade easily) |
| Credit Requirements | 600+ (moderate) | 600+ (similar) |
| Down Payment | 10-20% typical | First + last month (lower) |
A loan used to purchase equipment. Equipment serves as collateral, you own equipment, and make monthly payments until loan is paid off.
Learn more about equipment financing and equipment financing programs.
Renting equipment for a set period. You make monthly payments, use equipment, but don't own it. At end of lease, return equipment or purchase at fair market value.
Can claim Section 179 deduction (up to $1M) or bonus depreciation (100% first year) for qualifying equipment. Also deduct interest payments. Lower taxable income in early years.
Lease payments fully deductible as business expense. Simpler tax treatment. May provide better cash flow benefits.
Note: Consult tax advisor for your specific situation. Tax benefits vary by equipment type, business structure, and tax year.
Equipment financing is typically cheaper long-term since you own equipment. Leasing costs more over time but provides flexibility and lower monthly payments. Calculate total cost over expected use period.
Yes, most leases include buyout option. You can purchase equipment at fair market value or predetermined price at end of lease term.
Depends on situation. Financing offers Section 179/bonus depreciation (large upfront deduction). Leasing offers full deduction of payments. Consult tax advisor for your specific case.
Yes, both financing and leasing available for used equipment. Rates may be slightly higher. Lenders assess equipment value and condition.
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