Equipment Loan vs. Equipment Lease
The right structure depends on how long you plan to use the machine, whether you want ownership at end of term, and your tax posture.
The quick answer
If you'll keep the machine for its useful life and want depreciation, use an EFA or $1-out lease. If you want lowest monthly payment and plan to upgrade in 3–5 years, use an FMV lease.
Side by side
| Equipment Loan (EFA) | Equipment Lease | |
|---|---|---|
| Ownership | You own on day one | Lessor owns; you use |
| End of term | You keep it | $1 buyout, FMV, or return |
| Monthly payment | Higher | Lower (FMV) / similar ($1-out) |
| Tax treatment | You depreciate + deduct interest | FMV: full payment deductible |
| Down payment | 0%–15% | 0%–first & last |
| Term | 24–84 months | 24–72 months |
When Equipment Loan (EFA) is the right call
- You want to own the equipment outright
- You'll use it for 7+ years
- You want to depreciate the asset (Section 179 / bonus)
- You're buying used equipment from a private seller
When Equipment Lease is the right call
- You want the lowest monthly payment
- You expect to upgrade in 3–5 years
- You prefer full payment as an operating expense
- The equipment obsoletes quickly (tech, robotics)
Bottom line
For most CNC, press, and packaging equipment, we recommend an EFA—simpler, cleaner ownership, and Section 179 friendly. FMV leases fit when you genuinely plan to upgrade.
Frequently Asked Questions
EFAs and $1-out capital leases qualify for Section 179 and bonus depreciation because you're treated as the owner. True FMV operating leases do not—you deduct the full lease payment as an operating expense instead.
At end of term, an FMV lease lets you return the equipment, renew, or buy it at fair market value (typically 10%–20% of original cost). A $1-out lease is effectively a loan dressed as a lease—you own the machine outright at term-end for one dollar.
Yes. Age caps depend on the equipment type and lender—CNCs, presses, and injection molders 15–25 years old often still qualify. Private-party sales (not dealer) are financeable too, they just need a third-party inspection.
Usually yes, up to 20%–25% of hard equipment cost. Rigging, tooling, software, and training are the most commonly bundled soft costs. Beyond that percentage, lenders start asking for a separate structure.
Zero to 15% on an EFA for an established shop with decent credit. Startups or challenged credit run 10%–25% down. FMV leases can go zero down with first and last payment at signing.
Application-only deals under $250k fund in 2–5 business days. Full financials over $250k typically take 7–14 business days from complete package to funding.
Almost always for closely held businesses. Some larger, well-capitalized shops can negotiate a limited or springing PG. The equipment itself is always the primary collateral.
Other comparisons
Funding Requirements Checklist for US manufacturers
See exactly what underwriters actually look at — for factoring, PO financing, equipment, working capital, ABL, and SBA — before you fill out a single application.
- What documents you need for each program
- Typical time-to-fund by program
- Common disqualifiers worth knowing up front
- How Manufactor Finance is compensated — $0 fees to you
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