Business Insights

Should your business lease or buy equipment?

Learn about the factors to consider when choosing whether to lease or buy equipment.

Whether it’s a commercial oven, a piece of heavy machinery, or new technology to improve productivity, acquiring equipment is a major decision for any business. How to acquire that equipment—leasing versus buying—can significantly affect cash flow, tax strategy, and long term growth.

“Business owners know procuring new equipment or technology is a strategic decision for the company,” says Ryan Driscoll, SVP, Specialized Vertical Channel Leader for Ascentium Capital, a division of Regions Bank. “However, it’s equally important to consider the best way to pay for those revenue generating assets.”

So what option works best? Understanding the tradeoffs between leasing and purchasing can help make a informed choice that supports business goals without overextending finances.

Lease vs. buy: Understanding the basics

Before evaluating which option best fits a business need, it’s helpful to understand the fundamental differences.

Buying equipment

• The company owns the asset outright
• Equipment appears on the balance sheet
• May offer long term cost savings and resale value
• Requires a larger upfront investment or loan

Buying is often attractive for equipment expected to be in operation for many years—especially if it holds value and is unlikely to become outdated.

Leasing equipment

• Pay to use the equipment for a defined period
• Typically requires less upfront capital
• Payments are predictable and often treated as operating expenses
• Provides flexibility to upgrade or replace equipment as needs change

Leasing is commonly used when equipment evolves quickly or when preserving cash is a priority.

“Every business is different, with its own priorities,” Driscoll notes. “When clients approach us to finance new equipment, we focus on how the acquisition supports their operations and long term goals—and then recommend financing accordingly.”

Key factors to consider when choosing whether to lease or buy:

1. Cash flow and budget flexibility

   Cash flow is critical for day to day operations. Large upfront purchases can strain working capital, even if the equipment ultimately increases productivity.

   • Buying may require a down payment or significant cash reserves
   • Leasing spreads payments over time, easing short term impact

   In some cases, financing programs allow businesses to delay payments until equipment is installed and generating revenue—helping align costs with returns.

2. Total cost of ownership

   The purchase price is only part of the equation. Consider:

   • Maintenance and repairs
   • Insurance
   • Taxes
   • Storage or transportation costs

   Whether leasing or purchasing, these ongoing expenses can add up and should be factored into any decision.

3. Equipment lifespan and obsolescence

   If equipment is likely to become outdated—such as certain technology or software—leasing can reduce the risk of being tied to obsolete assets.

   For equipment with a long useful life, ownership may provide more value over time, especially once financing is paid off.

4. Tax considerations

   The effect of equipment acquisition on taxes varies depending on how equipment is acquired.

   • Purchased equipment may be depreciated over time or qualify for accelerated depreciation
   • Lease payments are often deductible as operating expenses

   Because tax implications can differ based on a company’s financial situation, it’s important to consult a tax advisor before making a decision.

5. Long-term business strategy

   Growth plans matter. Businesses that expect rapid expansion, fluctuating demand, or technology upgrades may value the flexibility that comes with leasing. Meanwhile, companies with stable operations and predictable needs may benefit more from ownership.

Making the right choice for your business

There’s no one-size-fits-all answer. Leasing and buying both offer advantages—and the “right” choice depends on your cash flow, growth plans, and tolerance for risk.

Working with an experienced financial partner can help key decision makers evaluate options and structure financing to support both short term needs and long term success.

Ready to help

Ascentium Capital, a division of Regions Bank, is an award-winning commercial lender providing equipment and technology financing solutions. Our unique finance platform, combined with exceptional customer service, paves the way for fast, flexible financing for virtually any business need. Connect with us to learn more.