Equipment Financing vs. Leasing
The short version: finance the equipment you plan to keep, lease the equipment you plan to replace. A loan costs more per month and less over the life of the asset. A lease costs less per month, preserves cash, and hands the obsolescence risk to the lessor.
| Factor | Equipment loan | Equipment lease |
|---|---|---|
| Ownership | You own it from day one | Lessor owns it until buyout |
| Down payment | 0–20% depending on credit | First and last payment, often $0 down |
| Monthly payment | Higher | 10–30% lower |
| Term | 24–84 months | 24–72 months |
| Tax treatment | Section 179 / bonus depreciation on full cost | Payments deducted as an operating expense |
| End of term | Free and clear — payments stop | $1 buyout, FMV buyout, return or upgrade |
| Best for | Trucks, machinery, long-life assets | Technology, fast-obsoleting or short-use equipment |
| Credit flexibility | Tighter | Easier — lessor holds title |
When financing wins
- The equipment has a long useful life — trucks, trailers, CNC machines, excavators.
- You want the Section 179 deduction on the full purchase price this tax year.
- You will still be using the asset in five to ten years, so residual value matters.
- You want to build equity and eventually own an unencumbered asset.
When leasing wins
- The equipment becomes obsolete quickly — imaging, POS, IT, diagnostic tools.
- Cash on hand is tight and the lower monthly payment protects working capital.
- Your credit or time in business does not yet support a conventional loan.
- You want a planned upgrade cycle rather than a resale problem.
The middle option: $1 buyout lease
Most Northwood clients who intend to keep the equipment end up in a $1 buyout lease. It prices and behaves like a loan, qualifies for Section 179, and often approves faster with less down than a straight equipment loan. A fair-market-value lease is the true "rent it" option, with the lowest payment and no ownership at the end.
Run the numbers on your deal
We quote both structures side by side on every request, so you can compare total cost of capital instead of just the monthly payment. See full program details on our equipment financing page or start a soft-pull prequalification on the apply page.
Frequently asked questions
- Is it cheaper to finance or lease equipment?
- Over the full life of the asset, financing is almost always cheaper because you own the equipment at the end and stop paying. Leasing has a lower monthly payment and lower upfront cash, so it wins on short-term cash flow and on equipment that becomes obsolete quickly, like technology.
- Should I lease or buy equipment for tax purposes?
- A financed purchase qualifies for Section 179 and bonus depreciation, so you can write off the equipment cost in the year it is placed in service. A true operating lease is deducted as a rent expense instead, spread over the lease term. Confirm your situation with your CPA — the right answer depends on your taxable income this year.
- What is a $1 buyout lease?
- A $1 buyout lease is functionally a loan structured as a lease: you make lease payments and buy the equipment for one dollar at the end. It carries loan-like pricing and Section 179 treatment, and it is the most common structure for equipment you intend to keep.
- Which is easier to qualify for?
- Leases are generally easier. Because the lessor keeps title, a lease can approve on lower credit and less time in business than a comparable equipment loan, often with little or nothing down.
Get a Loan Quote and a Lease Quote on the Same Equipment.
Speak with a Northwood funding specialist today. Most decisions in 24–48 hours.
- ✓ $25K–$5M available
- ✓ Funded in 2–5 business days
- ✓ All credit profiles considered
- ✓ No upfront fees, no prepayment penalties