A Sterling, CO business that buys a truck, loader or shop lift with an equipment loan owns it from the start and pays it off over the term. A lease keeps payments lower or shifts the end-of-term choice, and a $1 buyout lease ends much like a purchase.
Brookmark Financial in Sterling, Colorado explains the lease-or-buy choice and passes equipment requests to funding partners, who set the terms.
Buying with an equipment loan: ownership and payments
With an equipment loan, the business owns the machine, the lender holds a lien on it until the loan is paid, and the business keeps it afterward. Payments cover the price plus interest. Equipment financing also covers equipment finance agreements, which work much the same.
An equipment loan also fixes the cost. Once the machine is paid for, the payments stop and the machine keeps working, which is why a business that runs machines for many years can come out ahead by owning. The trade-off is a larger commitment up front, through the down payment, and the responsibility for repairs.
Ownership means the business carries the machine's value on its books and can sell it or trade it in later. It also means the business takes the risk that the machine is worth less than expected when it is sold.
Leasing: fair market value vs $1 buyout
A fair market value (FMV) lease has lower payments. At the end, the business can return the machine, renew the lease, or buy the machine at its value then. A $1 buyout lease has higher payments and ends with a purchase for one dollar, so it behaves much like a loan.
Read the lease for what it says about wear, hours and the return condition. An FMV lease on a loader may limit the hours per year and charge for excess wear at the end. A business that works a machine hard can find those charges add up, and the $1 buyout structure avoids them.
Illustration only, invented figures: on a $90,000 loader, a $1 buyout lease of 60 payments of $1,820 totals $109,201 (our arithmetic). An FMV lease of 60 payments of $1,390 totals $83,400, but the business does not own the loader at the end unless it pays the value then.
Trucks, loaders and shop lifts: how the choice differs
Trucks are titled, wear out on a schedule, and are often traded in; leasing can suit a business that replaces them every few years. Loaders and skid steers hold value and work for many years, which favors buying for a business that will keep them. A two-post lift is bolted to the shop floor and stays in service for years, so a shop that plans to stay in its building usually buys one, while a shop on a short lease weighs what happens to the lift when it moves. Attachments used a few weeks a year may be candidates for buying used or renting rather than a new lease.
Seasonal use is the other test. A machine that sits most of the year costs the same each month under a loan or a lease, so rental or a subcontractor's machine may make more sense for equipment used only a few weeks. A business can price a season of rental against a year of payments before deciding.
Construction employers in Logan County, CO counted 44 establishments in 2023 (County Business Patterns); the construction page covers contractor equipment in more detail.
Tax questions to take to an accountant (no tax advice here)
Leases and loans are treated differently for tax purposes, and the treatment depends on how the agreement is written. That is a question for the business's accountant, not for a funding partner and not for this article.
Bring the accountant both quotes, with the term, payments, buyout and fees, and ask which fits the business's tax picture.
Lease against loan on one loader: the illustrated totals
Illustration only, invented figures: buying the same $90,000 loader with $10,000 down and an equipment loan of $80,000 at an annual rate of 9% over 60 months costs about $1,661 a month, and $109,640 in total including the down payment (our arithmetic). The $1 buyout lease above totals $109,201, $439 less than the loan in this example, with no down payment but higher monthly payments.
The two totals in this example land close together. The deciding points are then the down payment the business can spare, the monthly payment it is comfortable with, and whether it wants to own the loader at the end without a final purchase.
The numbers in a real comparison will differ. The method holds: add every payment, the down payment, the buyout and every fee for each option, and compare who owns the machine at each point.
Lease-or-buy questions from Logan County, CO owners
Owners ask whether a lease is approved more readily than a loan (it depends on the partner and the business), whether a lease can be ended early (usually only with a payoff that can be large), and whether a used machine can be leased (some lessors lease used equipment).
For a building, a term loan is the fit, not a lease of equipment. Send both quotes through the request form or by phone, and run the payments in the equipment loan calculator.
By Brookmark Financial · Updated
