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Capital Equipment Financing FAQ

Common Questions Asked ~ Leasing / Renting vs. Buying

Should I lease a machine, or should I finance the machine via a loan? How do the tax benefits work under a lease or a loan? What is the primary difference between a lease and a loan?

On a lease, you the customer make monthly payments on a piece of equipment. At the end of the term, you have the option to buy the equipment as outlined below:

Small Purchase Option as low as $1.00, or
A higher stated purchase option equal to 10% or 20% of the original equipment price, or
At the fair market value of the equipment at the end of the lease.

On a loan, you the customer make monthly payments on a piece of equipment. Since you have owned the machine since the day you bought it, you do not have a purchase option at the end of the term.

Do I get the tax benefits of Section 179, Bonus Depreciation, and Standard Deprecation on a Loan and on a Lease?

On a Loan, or a Lease with a $1 or $101 purchase option, you retain these tax benefits
On a lease with a fair market value purchase option (known as an Operating Lease), the lender holds onto these tax benefits.

Why would I want to consider an Operating Lease if I have to give up the Tax Benefits?

If you choose an Operating Lease, you will trade these tax benefits for a much lower payment. You would want to talk to your financial advisor to determine which is the best decision for you.

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