Should You Lease or Finance? A Simple Breakdown

When it comes time to add additional pieces of equipment, most business owners start with the same question:

“Should I lease… or should I finance?”

As we head into 2026 — with interest rates, equipment prices, and lender guidelines continuing to shift — choosing the right structure can have a major impact on cash flow, approval strength, and long-term ROI. This guide breaks down the difference between leasing and financing in a simple, practical way so you can make the best decision for your business.

What’s the Difference Between Leasing and Financing?

Although both options help you acquire equipment without paying the full price upfront, they serve very different purposes.

Equipment Financing
You borrow funds to purchase the equipment and and you own it at the end of the term. This is ideal for long-term assets like trucks, excavators, trailers, or CNC machines. Payments are fixed, predictable, and ownership builds value over time.

Equipment Leasing
Leasing is more like renting the equipment; payments are often lower, and at the end of the term, you either:
– Buy the equipment
– Upgrade to something newer
– Or return it, depending on the lease type

This structure is popular in industries where equipment becomes outdated quickly.

How Taxes Work: Financing vs. Leasing

Section 179 With Financing
When you finance equipment, you can typically deduct the full purchase price in the same year—even though you’re paying it off over time. According to the official IRS Section 179 guidelines, most financed equipment qualifies as long as it’s placed into service during the tax year.

For a more details, we break this down in our blog: Section 179: Unlock Growth & Tax Savings for your Business

Tax Treatment Under Leasing
With leasing, your tax benefits depend on the type of lease you choose (fair-market-value, $1 buyout, 10% option, etc). In many cases, monthly lease payments can be deducted as operating expenses, which helps reduce taxable income throughout the year instead of taking one large deduction upfront. This makes leasing attractive for businesses prioritizing steady cash flow or those that don’t want a major year-end write-off.

Additionally, certain types of capital leases may still qualify for Section 179, allowing the full cost of the equipment to be deducted in the first year, even though the structure is technically a lease. For companies that rotate equipment frequently or rely on rapidly advancing technology, these tax advantages and accounting benefits make leasing a compelling option.

How Monthly Payments Compare

Financing
– Slightly higher monthly payments
– You own the equipment at the end
– Better for long-term assets with stable value

Leasing
– Lower monthly payments
– Great for businesses prioritizing cash flow
– Ideal for industries with rapidly advancing technology

If you plan on using the equipment for many years, financing is generally more cost-effective. If you expect to upgrade frequently, leasing may be smarter.

How Approval Requirements Differ

Approval criteria differ between lenders and leasing companies—but understanding the basics will improve your chances no matter which structure you choose.

Financing Approvals
Lenders put more weight on:
– Time in business
– Cash flow shown in bank statements
– Owner’s credit
– Equipment type (age, mileage, condition)

If you want a deeper look into approval criteria, check out our Equipment Financing Checklist.

Leasing Approvals
Leasing companies may approve:
– Newer businesses
– Slightly lower credit profiles
– Equipment with strong resale value

However, they may require:
– Higher buyouts
– Additional fees
– Stricter documentation

For insight into broader industry expectations and why flexible financing options remain relevant, the ELFA 2025 equipment finance trends report highlights how lenders and lessors are adapting to economic shifts and offering flexible solutions that benefit lessees and borrowers alike.

When Leasing Makes More Sense

You may want to lease if:
– You prefer lower monthly payments
– You want the option to upgrade frequently
– Your industry relies on equipment that becomes obsolete quickly
– You don’t care about long-term ownership

This is common in medical, dental, technology, and some renewable-energy sectors.

When Financing Makes More Sense

Financing is typically the best choice if:
– You want long-term ownership
– You plan to keep the equipment for years
– You want to leverage Section 179
– Your business uses heavy or durable equipment
– You want predictable, fixed payments

In industries like trucking, construction, agriculture, and manufacturing, financing usually delivers a stronger lifetime ROI.

Which Option Is Cheaper Over Time?

In most cases, financing results in a lower total cost. Lease payments can be cheaper monthly, but:
– Lease buyouts can be 10-20% of equipment value
– Many leases include fees or penalties
– Financing builds equity and long-term ownership

Both options provide their own pros and cons that could sway a business owner in one direction or the other — but on average, in terms of total cost, financing proves to be the cheaper option.

The Bottom Line

Leasing = Flexibility. Financing = Ownership + Long-Term Value.

Both structures have their benefits. But the right choice depends on:
– Your cash flow
– Your tax strategy
– The equipment type
– How long you plan to use it
– Whether flexibility or ownership is more important

For most business owners, especially those buying commercial vehicles or heavy machinery, financing provides stronger ROI and tax advantages.

Still Unsure on Whether Leasing or Financing is Right for You? Let’s Break It Down Together

Choosing between leasing and financing isn’t always straightforward — and it shouldn’t be. Every business has unique cash-flow patterns, tax strategies, equipment demands, and long-term goals. At Truecore Capital, our team takes the time to understand your operation and walk though both options in detail. We break down monthly payments, tax advantages, buyout structures, and approval considerations so you can select the structure that aligns with your financial strategy.

Whether you want the flexibility of leasing or the long-term value of ownership, our specialists are here to help you compare real numbers and lender programs side-by-side.

👉 Call us today at (805) 387-6823 to talk through your options with one of our specialists, or
👉 Fill out a quick Contact Form below to get personalized leasing and financing terms for your next piece of equipment – one of our specialists will be in touch with you!

Sources:
– IRS, “Pulication 946 (2024), How to Depreciate Property”, [https://www.irs.gov/publications/p946]
– Equipment Leasing & Finance Association (ELFA), “Shaping the Future: ELFA Reveals Game-Changing 2025 Trends in Equipment Finance”, [https://www.elfaonline.org/news-and-publications/industry-news/read/2025/01/14/shaping-the-future–elfa-reveals-game-changing-2025-trends-in-equipment-finance].