Equipment financing: lease vs loan, real cost

Equipment financing comes down to one comparison the vendor won’t make for you: the total cost to own the equipment with a loan, against the total cost with a lease. The lease almost always has the smaller monthly payment, which is exactly why the monthly payment is the wrong number to compare. What matters is what you pay over the whole term, and what you own when it’s done.

On $100,000 of equipment, a loan might run $10,000 down plus $1,868 a month for five years, and you own it at the end. A lease might be $1,600 a month with a $10,000 buyout to keep it. The lease’s monthly payment is lower, but add it all up and the totals tell a different story than the two monthly figures do.

Compare the total, not the monthly

Put both offers side by side on the thing that matters, the total cost to end up owning the equipment. The loan total is your down payment plus every payment. The lease total is every payment plus the buyout, if you intend to keep it.

Bar chart comparing a $122,095 loan total against a $106,000 lease-plus-buyout total on $100,000 of equipment — On this deal the lease is cheaper to own by about $16,000. Change the rate, the buyout, or the term and the answer can flip, which is the whole point of running the numbers. *Editorial illustration, TreasuryClear.*

The lease vs loan calculator does this side by side: enter both offers and it returns the total cost each way and names the cheaper one. It’s the honest comparison because the answer genuinely depends on your specific numbers, not on which product a salesperson is paid more to move.

An industrial conveyor and roller system running through a plant — Production machinery you'll run for a decade is a classic buy: you want to own the durable asset, and the purchase gives you depreciation. *Michael Li via Pexels. Pexels License.*

The real deciding question: how long will you keep it

Cost is only half the decision. The other half is whether you’ll want the equipment long after you’ve paid for it, and that’s usually what breaks the tie.

Two panels: buy for equipment you'll run 10 years and want to own, lease for tech obsolete in three years or when you need to protect cash — When the total cost is close, the hold period decides. Buy what you'll keep and want to own; lease what goes obsolete or when cash is tight. *Editorial illustration, TreasuryClear.*

Buy when you’ll run the equipment for years. A loan leaves you owning a durable asset, and the purchase qualifies for Section 179 expensing and bonus depreciation, which is back to 100% in 2026. That tax treatment can swing the after-tax cost of buying well below the sticker comparison.

Lease when the equipment goes obsolete fast, like technology that’s outdated in three years, so you can hand it back and upgrade instead of owning a paperweight. Lease, too, when you can’t spare the down payment and need to protect cash, since a lease usually asks for little or nothing up front.

A steel-frame building under construction with a tower crane against a blue sky — On a job site, the calculus differs by machine: buy the excavator you'll own for years, lease the specialized rig you need for one project. *SSJF01 via Wikimedia Commons. CC0.*

Where the rate actually matters

Equipment loan rates swing widely with your credit, your time in business, and the equipment itself, often from the high single digits into the twenties. That range is real, but it’s not where most owners lose money. They lose it by comparing a lease’s low monthly to a loan’s higher one and stopping there, without counting the down payment, the buyout, or the asset they walk away owning.

Run the total both ways first, then let the rate and the hold period decide. If equipment is one piece of a bigger capital need, the financing router will place it against your other options, and the rest of the financing section covers the structures around it. This is an estimate and a summary, not tax or financial advice: the Section 179 math in particular depends on your situation, so confirm it with your CPA.

Frequently asked questions

Is it better to lease or buy equipment?

Buy equipment you'll run for years, especially durable machinery, because a loan ends with you owning an asset and Section 179 or bonus depreciation reward the purchase. Lease equipment that goes obsolete fast, or when you can't spare a down payment, because a lease you hand back protects cash and lets you upgrade. Compare the total cost each way, not the monthly payment.

How much does equipment financing cost?

Equipment loan rates vary widely with your credit and the equipment, commonly running from the high single digits into the twenties. What matters more than the rate is the total cost to own the equipment: the down payment plus every loan payment, versus every lease payment plus any buyout. The monthly figure alone hides which is cheaper.

What is a lease buyout?

It's the amount you pay at the end of a lease to keep the equipment rather than return it, often a fixed sum or a percentage of the original price. If you plan to keep the equipment, the buyout is part of the lease's true cost and has to be counted when comparing a lease to a loan.