Equipment Financing Calculator

Equipment money comes from three places, and the same machine can carry three different price tags depending on which door you walk through. A bank or credit union offers the lowest rate but underwrites your whole business, so approval takes one to three weeks and favors companies with clean financials and a couple of years behind them. An equipment finance company cares mostly about the collateral. Approval can come in a day or two, credit standards are looser, and used equipment is routine, but you pay a few points more for the convenience. Vendor financing, offered by the dealer or the manufacturer's captive finance arm, is the fastest of all and sometimes carries promotional rates as low as 0 percent on new models. That promotional rate deserves a closer look before you sign. Manufacturers often fund the discount out of the sale price, so ask what the machine would cost if you paid cash or brought your own financing. If the cash price is $6,000 lower, the free money is not free. The rate gap is worth real dollars. On $100,000 financed over five years, 6.5 percent costs $1,957 a month and about $17,400 in interest. At 9 percent the payment is $2,076 and interest climbs to roughly $24,600. That is about $7,150 for choosing the second-best source, which is why it pays to get a bank quote even when you expect the finance company to win on speed.

An equipment loan is simple: you borrow, the machine secures the debt, and you own it free and clear after the last payment, claiming depreciation along the way. A lease trades ownership for a lower payment. In a fair-market-value lease the residual is set high, often 10 to 25 percent of the original cost, and at the end you can return the equipment, extend, or buy it at its then-current value. A dollar buyout lease sets the residual at effectively zero, so your payments cover the whole cost and the equipment becomes yours for one dollar at the end. A 10 percent put option sits between them, with payments based on 90 percent of the cost and the last 10 percent due as a balloon. The residual slider on this calculator lets you test each shape. Take the defaults: a $100,000 machine with $10,000 down at 7 percent over five years finances $90,000 and costs $1,782 a month, with about $16,900 in interest. Move the residual to 10 percent and only $80,000 amortizes, so the payment drops to $1,584, but $10,000 is still owed when the term ends. Lower payment now, obligation later. A rough rule for choosing: buy equipment that outlives the financing, lease equipment that the financing outlives. A commercial truck or a CNC machine holding value for 15 years rewards ownership. A computer system that is obsolete in four years is a better candidate for a lease you can walk away from.

The three lender types look at the same deal through different lenses. A bank runs full commercial underwriting: tax returns, a debt schedule, and often a global cash flow analysis that pulls in your personal obligations. It wants the business itself to carry the payment with room to spare, and the equipment is almost an afterthought. An equipment finance company inverts that. Its first question is what the machine would fetch at auction, because resale value is its safety net. A standard commercial truck or a popular imaging system with a deep secondary market gets generous terms; a heavily customized machine built for one narrow process does not, no matter how healthy your revenue looks. Many finance companies specialize in a single category such as construction, medical, or restaurant equipment, and a specialist who knows the resale market will often beat a generalist's quote. Vendor programs underwrite the sale more than the borrower. Because the manufacturer profits on the equipment itself, captive lenders approve application-only deals well into six figures with no tax returns, sometimes the same day. The screening is lighter, which makes vendor financing the most forgiving route for a young company, though the pricing outside promotional windows reflects that.

Financed equipment can produce a tax deduction far larger than your first-year payments. Section 179 lets a business expense the full purchase price of qualifying equipment in the year it goes into service instead of depreciating it over many years. Legislation passed in 2025 raised the annual expensing cap to $2.5 million, with a phase-out that begins once total equipment purchases pass $4 million, and restored 100 percent bonus depreciation for property acquired after January 19, 2025. Bonus depreciation picks up whatever Section 179 does not cover. The mechanics of both are laid out in IRS Publication 946. The part that surprises first-time buyers: the deduction follows the purchase, not the cash. Buy a $200,000 machine with $20,000 down and a $180,000 loan, and you can generally deduct the full $200,000 in year one. At a 30 percent combined tax rate that is $60,000 off your tax bill, which exceeds a year of loan payments on the example above. Passenger vehicles carry separate, lower limits, and the caps adjust over time, so confirm the current figures with your accountant before building them into your cash flow plan.