Equipment Loan vs Lease — Buy or Rent Your Equipment?
Financing builds equity and ownership; leasing keeps payments low and gives you flexibility to upgrade. Compare cost, terms, and tax treatment to decide what's right for your business.
Side-by-Side Comparison
| Feature | Equipment Loan | Equipment Lease |
|---|---|---|
| Amount range | $25,000 - $15 million | $10,000 - $5 million |
| Interest rate | Starting at 5.5% | Starting at 4.99% |
| Term length | Up to 10 years | 12-84 months |
| Down payment | Up to 100% financing available; some require 10-20% down | No large down payment |
| Ownership | You own the equipment outright | Lessor owns it; you use it |
| Tax treatment | Depreciation & interest deductions (incl. Section 179) | Payments typically 100% deductible; off balance sheet |
| Best for | Equipment you'll use for its full useful life | Equipment you'll want to upgrade or replace |
Pros, Cons & Tax Implications
Equipment Loan
Build equity — you own the equipment when it's paid off
Depreciation and interest deductions, including Section 179
No restrictions on usage or mileage
You bear the resale/depreciation risk
Some lenders require 10-20% down
Equipment Lease
Lower monthly payments, no large down payment
Payments typically 100% tax-deductible
Upgrade, return, or purchase at end of term
You don't own the equipment unless you exercise a purchase option
Total cost over a long useful life can exceed financing
FAQ
Frequently Asked Questions
Finance the equipment if you want to own it outright, build equity, and plan to use it for its full useful life. Lease it if you want lower monthly payments, minimal upfront cost, and the flexibility to upgrade to newer equipment when the lease ends.
Equipment financing starts at 5.5% with terms up to 10 years, and can cover $25,000 up to $15 million. Equipment leasing starts at 4.99% with shorter 12-84 month terms, typically for $10,000 to $5 million.
Usually not — one of leasing's biggest advantages is no large down payment required. Equipment financing can go up to 100% of equipment cost for well-qualified borrowers, though some lenders require a 10-20% down payment depending on your credit profile.
Equipment loans often provide tax benefits through depreciation and interest deductions, including Section 179. Equipment lease payments are typically 100% tax-deductible as a business expense, and since you don't own the equipment, it stays off your balance sheet — which can improve your financial ratios.
Most leases offer end-of-term flexibility: purchase the equipment at a predetermined price, return it, or upgrade to newer equipment with a new lease. An equipment loan has no such decision point — once it's paid off, you own the equipment outright.
Leasing is usually the better fit for equipment that's replaced frequently (computers, certain medical or technology equipment) since you can upgrade at the end of each lease term instead of being stuck owning depreciated equipment.
Still have questions? Our loan experts are here to help.
Not Sure Whether to Finance or Lease?
Tell us about the equipment and how long you'll need it — we'll help you find the lower-cost option.