Equipment Financing vs Equipment Leasing

A loan used to purchase equipment. Equipment serves as collateral, you own equipment, and make monthly payments until loan is paid off.

• Advantages: Own equipment after repayment, lower total cost (no ongoing payments), build equity in equipment, claim depreciation tax benefits, can sell equipment anytime, no restrictions on use.
• Disadvantages: Higher monthly payments, less flexible (can't upgrade easily), responsible for maintenance/repairs, equipment may become obsolete, higher down payment (10-20%).

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.

• Advantages: Lower monthly payments, easy to upgrade equipment, lease payments fully deductible, lower down payment, no risk of obsolescence, maintenance may be included.
• Disadvantages: Higher total cost (no ownership), don't build equity, must return equipment (unless buyout), may have use restrictions, ongoing payments (no end date).

Choose Equipment Financing if:

• You'll use equipment long-term (5+ years)
• You want to own equipment
• Equipment won't become obsolete quickly
• You want lower total cost
• You can afford higher monthly payments

Choose Equipment Leasing if:

• You need lower monthly payments
• Equipment becomes obsolete quickly (tech, medical)
• You want flexibility to upgrade
• You need equipment short-term
• You want maintenance included

Equipment Financing: 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.

Equipment Leasing: Lease payments fully deductible as business expense. Simpler tax treatment. May provide better cash flow benefits.

Consult tax advisor for your specific situation. Tax benefits vary by equipment type, business structure, and tax year.