When it comes to equipment financing, you’ll typically face one key decision: should you lease or buy the equipment using a loan?
Both options can help you acquire the gear you need, but the right choice depends on your budget, how long you’ll use the equipment, and whether owning it outright matters to your business.
Let’s break down the differences between an equipment lease and an equipment loan so you can make the best decision.
The key distinction comes down to ownership and payment structure:
Equipment Loan: You borrow money to purchase the equipment. Once the loan is paid off, you own it.
Equipment Lease: You pay to use the equipment for a set term. Ownership may or may not transfer at the end.
Both options are considered forms of equipment financing, but they work in very different ways.
Here’s a side-by-side comparison to help you understand the trade-offs:
| Feature | Equipment Loan | Equipment Lease |
|---|---|---|
| Ownership | Yes, after full repayment | No (unless buyout option is included) |
| Monthly Payments | Higher (paying for ownership) | Lower (you’re only renting) |
| Upfront Costs | Often requires a down payment (5–20%) | Usually minimal or none |
| Flexibility | Less flexible—you're committed long-term | High—upgrade or return at end of lease |
| Tax Benefits | Depreciate the asset over time | May deduct full lease payment |
| Useful Life | Ideal for long-lasting assets | Best for tech that becomes outdated quickly |
Leasing might be the smarter choice if you:
Want lower monthly payments
Need to upgrade equipment regularly
Are using equipment for a short-term project
Want to conserve cash flow
Prefer to avoid asset depreciation
Leases are ideal for industries that rely on constantly evolving technology or seasonal equipment needs—like IT, healthcare, or media production.
Buying equipment with a loan may be the better option if you:
Plan to use the equipment for several years
Want to build equity in your assets
Need the equipment to perform core business functions
Prefer to eventually own the equipment outright
Loans are typically favored in industries where tools have a long useful life—such as construction, farming, or manufacturing.
| Scenario | Best Option |
|---|---|
| Need it temporarily | Lease |
| Want long-term ownership | Loan |
| Need to keep monthly costs low | Lease |
| Want to build equity in equipment | Loan |
| Need to upgrade often | Lease |
| Equipment lasts 5+ years | Loan |
A restaurant leasing kitchen equipment that needs frequent upgrades
A startup leasing computers for a 12-month contract
A healthcare clinic renting imaging machines with cutting-edge features
A construction company buying a backhoe to use daily for 10+ years
A logistics firm purchasing delivery trucks for long-term use
A salon buying hair dryers and chairs that don’t require frequent updates
Which is better: leasing or financing equipment?
Leasing is better for short-term use and flexibility. Financing is better for long-term use and ownership.
Both options offer tax advantages, but they differ in how deductions apply:
Loan: You can deduct interest and depreciate the equipment over time under Section 179.
Lease: You can typically deduct the entire lease payment as a business expense.
Check current IRS Section 179 limits here (opens in new tab)
Always talk to a tax professional to determine which strategy maximizes your savings.
There’s no universal answer—the right choice depends on your goals.
Want long-term assets? Go with a loan.
Need flexibility or frequent upgrades? Leasing makes more sense.
Whatever you decide, make sure to compare terms, interest rates, fees, and tax implications. And remember, both are smart ways to fund business growth without large upfront costs.
Don’t let cash flow stop you from growing. Whether you lease or finance, the right equipment can move your business forward.
Get started by comparing lenders, calculating your costs, and choosing a solution tailored to your goals.