Equipment Leasing vs Business Loan: How to Decide

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You need new equipment. Maybe it’s a fleet of trucks, a production machine, or upgraded kitchen gear. The question is, should you lease it or buy it with a loan? Both have benefits, but they serve different business goals.

Let’s walk through the key differences, when to use each, and how to make a smart call for your business.

Understanding the Basics: Lease vs Loan

A business loan gives you a lump sum that you use to purchase equipment outright. You repay that amount over time with interest.

Equipment leasing lets you use the equipment for a set term in exchange for regular payments. At the end, you may have the option to buy, return, or upgrade it.

Platform Funding offers both equipment leasing and business loan solutions to help businesses stay flexible and efficient.

Pros and Cons: Loan vs Lease Comparison

FactorEquipment LeaseBusiness Loan
OwnershipMay own at endOwns from day one
Upfront CostLow or noneUsually 10% – 20% down
Monthly PaymentsLowerHigher
FlexibilityEasier to upgradeMore rigid
Tax TreatmentOften deductible as expenseDepreciation and interest deduction
Long-Term CostHigher over timeLower over time

Leasing helps preserve capital for machinery upgrades. Buying via loan may save money long-term, but requires more cash upfront.

When Equipment Leasing Makes Sense

Choose leasing when:

  • You upgrade often due to tech changes or wear-and-tear
  • Your business is growing fast and needs low upfront costs
  • You need gear for a defined short-to-medium term

Common lease use cases:

  • Commercial vehicles
  • Office tech and POS systems
  • Medical imaging or dental tools
  • Kitchen and food production equipment

Learn more about our equipment leasing options.

When a Business Loan Is the Better Fit

Opt for a loan when:

  • The equipment has a long useful life
  • You want ownership benefits like asset value and resale
  • Your business can handle larger initial payments

Loan is best for:

You own the asset, build equity, and may qualify for Section 179 tax deductions.

Check out Platform Funding’s business loan options.

Real-World Example: Lease vs Loan in Action

A landscaping company needed five new commercial mowers. A loan would require $25,000 down and full asset ownership. A lease allowed them to pay just $2,000 upfront, with upgrade options in 36 months. They chose leasing to preserve capital and stay flexible for new tech.

Tax Differences: What to Know

  • Lease payments may be fully deductible as an operating expense
  • Loan payments offer deductions only on interest and depreciation
  • IRS Section 179 allows equipment buyers to write off full value in year one (if eligible)

Always check with a tax professional to evaluate your best financial outcome.

Equipment Funding Options: How to Choose

Ask yourself:

  • How long will I need this equipment?
  • Do I want to own it or swap it later?
  • Can my cash flow handle a large down payment?
  • What matters more—monthly cost or lifetime value?

Use our financing decision help guide to weigh your priorities.

FAQs: Equipment Leasing vs Loan

Q: Is leasing always more expensive?
Not necessarily. It may cost more over time, but offers lower monthly payments and better upgrade flexibility.

Q: Can I lease used equipment?
Yes—many lessors, including Platform Funding, offer leases on gently used gear.

Q: What happens at the end of a lease?
You may return the item, extend the lease, or purchase it depending on terms.

Q: Do business loans require collateral?
Often yes. The equipment itself usually serves as collateral.

Q: How fast can I get equipment financing?
With Platform Funding, approvals can happen in days—not weeks.

Final Thoughts: Equip Your Business Without Slowing It Down

Every purchase shapes your balance sheet. The key is choosing funding that matches your growth strategy. Leasing keeps cash free and tech fresh. Loans build ownership and long-term value.

Want help deciding which is right for you? Talk to a Platform Funding advisor and get custom guidance today.