Funding Products
Equipment Leasing vs Buying: Running the Numbers
Nearly every business that uses machines faces this choice. The right answer depends on how long the asset stays useful and whether you want it on your balance sheet at the end.
The comparison is simple once you write down the total cost of each path plus the residual value of the asset.
The core trade-off
Financing to own means higher payments but you keep an asset with residual value. Leasing means lower payments and a clean exit, but you own nothing at the end unless you exercise a purchase option.
Total cost over a decade usually favors ownership for durable equipment and favors leasing for anything you replace on a short cycle.
Lease when
- Technology becomes obsolete quickly — computers, imaging, diagnostics
- You replace the asset every two to four years anyway
- Cash preservation matters more than long-run cost
- Maintenance is bundled and meaningful to you
Finance to own when
- The equipment runs productively for 7 to 15 years
- Resale value stays strong — trucks, lifts, CNC machines, trailers
- You want the asset unencumbered once the term ends
- The payment fits comfortably within your monthly cash flow
Do the arithmetic before the sales pitch
Write down total payments over the full term for each option, add any end-of-lease purchase price, and subtract the realistic resale value under the ownership path. Compare the two figures side by side.
Also confirm the tax treatment with your accountant. Depreciation deductions on purchased equipment can shift the comparison materially depending on your situation.
Frequently asked questions
- What is a $1 buyout lease?
- It is effectively a financed purchase disguised as a lease — you own the asset for a dollar at the end. Compare it against straight equipment financing on total cost.
- Can I lease used equipment?
- Yes, though terms are shorter and rates higher than for new equipment.
- Does leasing avoid a personal guarantee?
- Rarely for small businesses. Most equipment leases still require one.