Financing equipment almost always comes down to two structures: borrow to buy it outright, or lease it. Both get the equipment onto your floor; they differ in who ends up owning it, how the payments hit your cash flow, and how they're treated for tax purposes.
Equipment loan: you own it from day one
An equipment loan is a straightforward term loan secured by the equipment itself. You own the asset immediately, build equity in it as you pay down the balance, and can typically depreciate it for tax purposes. Down payments are usually required (often 10-20%), and if the equipment becomes obsolete before the loan is paid off, you still own — and owe on — the older asset.
Equipment lease: lower upfront cost, more flexibility at the end
Leasing typically requires little or no down payment and can offer a lower monthly payment than a loan on the same equipment, because you're paying for the use of the asset over the lease term rather than financing its full purchase price. At the end of the term, depending on the lease type, you may return the equipment, renew, or purchase it for a predetermined (often nominal, for a capital/finance lease) or fair-market-value amount (for an operating lease). Leasing can be attractive for equipment that depreciates quickly or gets replaced on a predictable cycle — trucks, computers, some medical and manufacturing equipment.
Which one fits
- Equipment with a long useful life you intend to run until it's fully depreciated → a loan usually builds more long-term value, since you own the asset outright once it's paid off.
- Equipment that gets technologically outdated or needs replacing every few years → leasing avoids being stuck owning (and financing) equipment you no longer want.
- Cash preservation matters more than long-term ownership cost right now → leasing's lower upfront cost frees up capital for other uses.
- You want the depreciation and interest deductions on your own books → a loan gives you the asset to depreciate directly, including the option to elect Section 179 and deduct the full cost in year one instead of spreading it out. A lease deducts the payment itself as an operating expense instead. The total deduction ends up similar either way; what changes is the timing -- worth reviewing with your accountant before deciding.
Either way, the numbers should drive the decision as much as the structure. Our equipment lease vs. loan calculator runs both sides side by side -- monthly payment, residual value, and estimated tax savings -- using the same standard equipment-finance rate assumption as our other calculators.
Get your full pre-qualification estimate and a BizyFi advisor will help you compare real loan and lease terms side by side for your specific equipment.