# Equipment leasing

Source: https://businessloanbroker.ai/business-loans/equipment-leasing/
Site: BusinessLoanBroker.ai (powered by Levr)

> Equipment leasing gives you the use of equipment for a monthly payment, with a buyout or return at the end. Lease types, real costs and when buying wins.

An equipment lease gives you the use of a machine, vehicle or system for a fixed monthly payment over two to five years. At the end you return it, renew, or buy it for a set price. Payments are typically lower than a loan, approval is fast and often requires no down payment, and the implied cost runs roughly 6% to 30% a year. It suits equipment that ages quickly; for equipment you will keep for a decade, buying is usually cheaper.

## Key facts
- **Amounts:** $5,000 to $5 million; most leases under $250,000
- **Typical cost:** Implied rate of 6% to 30% a year depending on credit and lease type
- **Terms:** 2 to 5 years, occasionally 7 for heavy equipment
- **Time to fund:** 1 to 7 business days
- **Minimums most lenders use:** 1 year in business and 600 credit; startups with 620 to 680 credit and first and last payment up front

## What is equipment leasing?

A leasing company buys the equipment and rents it to you. There are two main kinds. A fair market value lease has the lowest payments and lets you return the equipment or buy it at its current value when the term ends. A $1 buyout lease, also called a capital lease, has higher payments and transfers ownership to you for $1 at the end; in practice it is a loan by another name.

Between them sit fixed purchase option leases, often 10% of the original cost. The choice changes the payment, the tax treatment and who owns the asset. [Equipment financing](https://businessloanbroker.ai/business-loans/equipment-financing/) is the alternative if you know you want to own it.

## Who qualifies for an equipment lease?

Leasing companies approve a wider range of businesses than banks because they own the asset and can take it back. Most want one year in business, owner credit of 600 or higher and bank statements showing the payment is affordable. Startups are often approved with 620 to 680 credit and the first and last payment up front.

- Declined most often: equipment with poor resale value, owners with a prior repossession or lease default, and industries the lessor has lost money in.
- Vendor and manufacturer programs are often the easiest approvals, since the vendor subsidizes the rate to make the sale.
- If credit is the issue, see [bad credit options](https://businessloanbroker.ai/situations/bad-credit/); a larger first payment often turns a decline into an approval.

## What does an equipment lease really cost?

A typical example on an $80,000 machine over five years. A fair market value lease might run $1,450 a month, $87,000 in total, after which you return it or buy it for its market value, often $8,000 to $16,000. A $1 buyout lease might run $1,720 a month, $103,200 in total, and you own it. Priced as a loan, that is an implied rate of roughly 10.5%.

Lessors rarely state a rate, so calculate it yourself: total payments plus the buyout, compared with the price. Also check for documentation fees, interim rent before the first full payment, and end of lease charges for wear or late returns. Our [lease versus buy comparison](https://businessloanbroker.ai/compare/lease-vs-buy-equipment/) has the full math.

## How do you qualify, and what documents do you need?

Leases under about $150,000 are usually application only: the vendor quote, your formation documents, an ID and three months of bank statements. Larger leases add two years of business tax returns, interim financials and a personal financial statement for each 20% owner. Startups add a business plan and a resume.

Pull the list from our [document checklist](https://businessloanbroker.ai/guides/document-checklist/). The one document that matters most is the quote: it must state the exact equipment, any soft costs like installation, and the delivery date, because the lessor pays the vendor against it and sets the first payment from the delivery date.

## How long does an equipment lease take?

Typically one to seven business days from application to the lessor paying the vendor. Application only leases are often approved within hours. Larger or unusual equipment adds a week for inspection or a second approval.

As with financing, the vendor's lead time is the real limit, since the lease starts when the equipment is delivered and accepted. Sign the delivery acceptance only when the equipment works; once you sign, the lessor pays the vendor and your obligation begins regardless of any defect. See [how long business loans take](https://businessloanbroker.ai/guides/how-long-it-takes/) for comparison with other products.

## When should you choose something else?

Choose [equipment financing](https://businessloanbroker.ai/business-loans/equipment-financing/) if you will keep the asset well past the term, because the total cost of owning is usually lower and you build equity from the first payment. Choose an [SBA 504 loan](https://businessloanbroker.ai/business-loans/sba-504-loans/) for heavy, long life equipment over $500,000, where a fixed 10 to 20 year rate beats any lease.

Skip leasing if the lessor cannot state the total cost or the buyout in writing. A lease that quotes only a monthly payment is hiding the rate, and some fair market value leases roll into expensive month to month rent if you miss the return window.

## How do you apply for an equipment lease?

Apply once on this site with your vendor quote and your application reaches leasing companies and equipment lenders that cover your industry, so you can compare a lease against a loan side by side. It is free for your business, and we are paid the same whichever lender you choose. Or ask your AI assistant to apply through our [MCP server](https://businessloanbroker.ai/agents/): it reads the quote and your statements, fills the application and submits it.

| Option | Monthly payment | Ownership at the end | Speed | Best for |
|---|---|---|---|---|
| Fair market value lease | Lowest | Return, renew or buy at market value | 1 to 7 days | Fast aging equipment, upgrades |
| $1 buyout lease | Higher | Yours for $1 | 1 to 7 days | Owning, with lease style approval |
| Equipment financing | Similar to $1 buyout | Yours when paid off | 1 to 10 days | Long life equipment, building equity |

## Questions and answers
**Is leasing cheaper than buying equipment?**

Month to month, usually yes. Over the full life of the equipment, usually no, because you pay for the use and then pay again to buy it or replace it. Leasing wins when the equipment will be obsolete or when preserving cash matters more than total cost.

**Are lease payments tax deductible?**

Fair market value lease payments are generally deductible as an operating expense. A $1 buyout lease is usually treated as a purchase, so you depreciate the asset instead. Accounting rules changed in recent years, so confirm the treatment with your accountant.

**Can I end a lease early?**

Rarely without paying most of the remaining payments. Equipment leases are typically non cancellable. If you may need to exit, negotiate a buyout schedule up front or choose a shorter term with a renewal option.

**What happens at the end of a fair market value lease?**

You choose to return the equipment, continue renting month to month, or buy it at its appraised value. Watch the notice period: many leases require written notice 60 to 90 days before the end, or they renew automatically at the same payment.

## Related
- [Equipment financing](https://businessloanbroker.ai/business-loans/equipment-financing/)
- [Commercial vehicle loans](https://businessloanbroker.ai/business-loans/commercial-vehicle-loans/)
- [Leasing versus buying equipment](https://businessloanbroker.ai/compare/lease-vs-buy-equipment/)
- [Business loan document checklist](https://businessloanbroker.ai/guides/document-checklist/)
- [Construction business loans](https://businessloanbroker.ai/industries/construction/)

## Apply
Apply for the business: https://apply.businessloanbroker.ai/signup?utm_source=direct&utm_medium=organic&utm_content=md-equipment-leasing
MCP server for AI agents: https://mcp.businessloanbroker.ai/mcp (docs: https://businessloanbroker.ai/agents/mcp/)