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Equipment leasing vs. equipment loans

Published October 5, 2026

Most equipment financing falls into two camps: a loan (sometimes called a financing agreement) or a lease. They can fund the same machine, so the right choice depends on how you plan to use it and how you want to manage cash.

Equipment loans

With a loan you borrow to buy the equipment and repay with interest over a fixed term. You own the asset from day one, and the lender holds a security interest until the balance is paid.

• Best when you plan to keep the equipment for most of its useful life.
• Usually builds equity as you pay down the balance.
• Typically requires a down payment, though some programs finance the full cost.

Equipment leases

With a lease the lender owns the equipment and you pay to use it. At the end of the term you may return it, renew, or buy it, depending on the lease type.

• Best when equipment loses value quickly or you want to upgrade regularly.
• Payments may be lower, particularly when a residual value is set.
• A fair market value (FMV) lease usually has a lower payment but a more open-ended buyout. A $1 buyout (or fixed purchase option) lease behaves much like a loan.

What to compare

1. Total cost over the term, not just the monthly payment.
2. What happens at the end of the term.
3. Tax and accounting treatment, which varies by structure and jurisdiction. Confirm with your accountant.
4. Down payment, deposits and fees.
5. Restrictions on use, hours, location or modifications.

Use the payment calculator to compare monthly payments under different assumptions.