Equipment loans vs leases: which one is better for your business?

3 mins
Updated
March 4, 2025

When your business needs equipment, vehicles, or machinery, deciding whether to take out an equipment loan or lease the equipment can impact your cash flow, tax deductions, and long-term financial health. Both options help you access the tools you need without paying the full cost upfront — but which is right for you depends on your business needs, cash flow, and how long you'll need the equipment.

When an equipment loan is better

An equipment loan is basically like a car loan — you borrow money to buy the equipment, then pay it off in installments.

Pros:

  • You own the equipment at the end of the loan.
  • No ongoing lease payments once the loan is paid off.
  • Can be cheaper overall if you use the equipment for many years.
  • Can claim depreciation + interest as tax deductions.
  • Ideal for equipment with a long lifespan (like vehicles or machinery).

Cons:

  • Higher upfront costs (deposit + loan fees).
  • Full responsibility for repairs and maintenance.
  • Ties up capital that could be used to grow the business.
  • Harder to upgrade if the equipment becomes outdated quickly.

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When an equipment lease is better

Leasing is like renting — you pay monthly for the equipment without ever owning it (unless you choose to buy it at the end).

Pros:

  • Lower upfront cost (good for cash flow).
  • Easier to upgrade to newer models.
  • Lease payments are 100% tax-deductible.
  • Maintenance and repairs are often included.
  • Good for equipment that becomes outdated quickly (tech, software, medical equipment).
  • Easier to get approved than a loan (especially for new businesses).

Cons:

  • You don't own the equipment.
  • Can cost more over time.
  • Locked into fixed payments even if you stop using the equipment.
  • May have mileage limits or wear-and-tear clauses.

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Which option is right for you?

  • Vehicles & machinery → Loan
  • Technology & IT → Lease
  • Medical equipment → Lease
  • Tools for short term projects → Lease
  • Long term business growth assets → Loan

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If you're looking for long-term ownership and want to minimise costs over time, an equipment loan is often the better choice. However, if you prefer lower upfront costs and the flexibility to upgrade regularly, an equipment lease may suit your business better.

Before making a decision, consider your business’s cash flow, how quickly the equipment might become outdated, and whether ownership is essential to your operations.

Disclaimer
Prepared by Beck McLean Finance Pty Ltd ABN 80 632 809 833. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.
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