Financing vs leasing
Financing makes the equipment yours from day one with a lien until it is paid off. A lease lets you use it for a set term and then decide. Here is one purchase run through both, with the arithmetic.
✓ Checking what you qualify for does not affect your credit score.
Updated October 13, 2026 · Merchant Fund Express
Finance equipment you will use until it wears out and that holds its value: you own it, you keep whatever it is worth at the end and the total cost is usually lower. Lease equipment that goes out of date fast, that you may want to upgrade in a few years, or when you need the lowest cash at signing. A $1 buyout lease behaves much like financing in a lease contract; a fair market value lease behaves more like a long rental.
| Equipment financing | Lease | |
|---|---|---|
| Who owns it during the term | You do; the funder holds a lien | The lessor does |
| Cash at signing | A down payment, often 10% to 20% | Often the first payment, sometimes first and last |
| End of term | Paid off and lien released | Return it, renew, or buy it (at fair market value or for $1, depending on the lease) |
| Upgrading | Sell or trade the equipment yourself | Return and lease newer equipment |
| Early exit | Pay off the remaining principal, per the agreement | Often owe most or all of the remaining payments |
| Tax treatment | Ask your tax professional | Ask your tax professional |
Tax treatment differs between financing and the two kinds of lease, and it depends on your situation. Read our Section 179 guide and confirm with your accountant before choosing on tax grounds.
A restaurant needs a $60,000 cooking line and walk-in cooler. Delivery is Monday, November 16, 2026, with monthly payments due on the 1st, starting December 1, 2026, for 48 months. The last payment is November 1, 2030.
| Financing | Fair market value lease | $1 buyout lease | |
|---|---|---|---|
| Cash at signing | $6,000 down payment | $2,500 (first and last payment) | $1,585 (first payment) |
| Monthly payment | $1,422.03 ($54,000 at 12% APR) | $1,250 | $1,585 |
| Total of 48 payments | $68,257.30 | $60,000 | $76,080 |
| End of term | Owned, nothing more due | Return it, or buy at fair market value (estimate $9,000) | Buy for $1 |
| Total to own at the end | $74,257.30 | $69,000 if bought at the estimate | $76,081 |
| Total if you hand it back | Not applicable; you sell it yourself | $60,000 | Not applicable |
Here the financing costs $1,823.70 less than the $1 buyout lease to end up owning the same kitchen, and it asks for $4,415 more in cash at signing. The fair market value lease is the cheapest way to use the kitchen for four years if the restaurant plans to hand it back, and its final cost to own depends on a buyout figure nobody knows yet. If that end value comes in at $14,000 instead of $9,000, owning through the lease costs $74,000, almost exactly the financing total.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
Durable equipment with resale value that you plan to keep for its full life, and a business that can spare the down payment.
Technology or equipment that dates quickly, or a business that expects to upgrade or move within the term.
Owners who want to own at the end but need the smallest possible cash at signing, and accept a higher total.
A business whose deposits cannot carry the payment, or a location with a short or uncertain lease. A lease on equipment you cannot use is the hardest contract to get out of.
Equipment financing is one of the products we discuss. Leases are not; if a lease fits better, take the lessor’s written quote and compare it on the rows above, including what you owe if you leave early. If you need cash beyond the equipment itself, such as installation, a hood inspection or opening inventory, working capital or a term loan can sit alongside the purchase. Read equipment financing for restaurants and equipment purchase funding.
Ask every lessor to write down the purchase option at the end of the term. A fair market value figure that is defined only as what the lessor decides later is a number you cannot compare.
Compare your own quotes with the offer comparison calculator, and see whether the payment fits with the payment burden calculator. To see what equipment financing could look like for your file, check the free qualification check or go straight to the application.
Only if you hand the equipment back. To end up owning it, financing is usually cheaper in total, as the example shows.
A lease where you buy the equipment for $1 at the end. The payments are higher than a fair market value lease because you are effectively paying for the whole item.
Often only by paying most or all of the remaining payments. Read the early termination clause before signing.
Leases are not one of the products we publish. Equipment financing, term loans and working capital are, and we review files on bank statements in all 50 states.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
