The Ins and Outs of Equipment Leasing

If your business depends on expensive equipment, paying for it upfront might not be the best move. Large cash purchases can strain cash flow, delay growth, or even disrupt payroll. Instead, equipment leasing and financing offer a flexible, cash-friendly way to acquire the assets you need—without tying up capital.

What is Equipment Leasing?

Equipment leasing is one of the most widely used financing methods in business, accounting for nearly one-third of all equipment in operation today—from computers to construction machinery. Think of it as a long-term rental that allows you to use equipment for a fixed period while making predictable monthly payments.

At the end of the lease, you typically have three options:

Return the equipment and upgrade to newer models.
Purchase the equipment at fair market value or a predetermined amount.
Extend the lease for continued use.

This flexibility makes leasing an attractive option for businesses that frequently upgrade technology, prefer lower monthly costs, or want to preserve working capital.

When Should Your Business Lease Equipment?

You can edit text on your website by double clicking on a text box on your website. Alternatively, when you select a text box a settings menu will appear. your website by double clicking on a text box on your website. Alternatively, when you select a text box

Before deciding on leasing vs. financing, ask yourself:

Is outdated equipment hurting productivity or profitability?
Would paying upfront put a strain on cash flow?
Does leasing provide better financial flexibility than a loan?
Would your business benefit from upgrading equipment frequently?
Can leasing provide tax advantages compared to purchasing?

Leasing is often a smart choice for businesses that rely on rapidly evolving technology (like medical, manufacturing, or construction industries). It’s also useful when cash flow preservation is a priority and purchasing would limit liquidity.

Leasing vs. Financing: What’s the Difference?

While leasing allows you to use equipment without ownership, equipment financing means purchasing the equipment with a loan.

Pros of Leasing:

Easier approval compared to loans, even for newer businesses.
Often requires no upfront down payment.
Helps preserve capital & maintain cash flow.
Lease payments can be 100% tax-deductible as an operating expense.
Eliminates risk of owning outdated equipment—simply return & upgrade.

Pros of Financing:

You own the equipment once the loan is paid off.
Eligible for tax benefits (Section 179 deduction & depreciation).
Can sell or repurpose the equipment once it’s paid off.
Loans can be paid off early to save on interest.

How Much Does Equipment Leasing Cost?

The cost of an equipment lease depends on several factors, including:

The type and value of the equipment
Your business credit profile
The lease term length (typically 24-72 months)
The residual value or buyout option at lease-end

💡 Most businesses can expect lease rates between 5-15% annually, depending on creditworthiness and equipment type

Ready to Explore Equipment Leasing?

If your business needs new equipment but you don’t want to tie up capital, leasing could be the ideal solution. Whether you’re looking for heavy machinery, technology, or medical equipment, Five West Financial can help you secure the best financing options available.