What Is The Difference Between Equipment Financing And Leasing?

Purchasing equipment for your business doesn’t need to be overwhelming, even with the upfront costs. Equipment leasing and financing help simplify the process and make top-notch brands accessible to all carriers.

In this blog, we are going to breakdown the differences between the two solutions, and help you determine which one is right for your business.

Equipment Leasing

Equipment leasing involves renting or leasing equipment rather than purchasing it outright. Equipment leasing offers various benefits, such as:

1. Cost-Effective Solution: Obtain equipment without breaking the bank and enjoy monthly, budget-friendly payments utilizing residuals.
   
   
2. Flexible Leasing Terms: Various leasing terms are available to suit your unique business needs.
   
   
3. Tax Advantages: Specific leasing options allow you to write off monthly lease payments as a business expense.

Equipment Financing

Equipment financing is a financial arrangement (loan) that allows businesses to fully own equipment without paying the full purchase price upfront.

1. Long Term Investment & Payments: The equipment is registered under your name with a lien holder added. Although trac leases include residual payments at the end of the lease, loan payments associated with equipment financing are typically higher.
   
   
2. Loan Terms: Specified term with no residual or balloons.
   
   
3. Tax Advantages: Since you are the owner of the equipment, you can take depreciation on the equipment in most cases.

How To Choose The Right Financial Solution

The decision between equipment leasing and equipment financing is typically based on factors such as business goals and cash flow preferences. Ultimately, your choice boils down to whether owning or leasing equipment will best support your current and future business operations.

For more information on the most common types of equipment financing and leasing solutions, check out our blog on TRAC Leases vs Finance Leases here.