For: Commercial equipment buyers, dealer finance teams and owners reviewing funding proposals.
The decision: Which funding structure fits the required equipment, cash position and exit plan.
60-second answer: Compare actual offers over the same period and service scope. Include upfront charges, payments, maintenance, buyout or return costs and verified tax effects. A low monthly payment does not establish the lowest cost, and an FMV lease is not automatically off the balance sheet.
Obtain the full offer, not just the payment
Pull equipment price and configuration, lender or lessor quotation, payment schedule, fees, deposits, service terms, insurance requirements, early-exit provisions and return or buyout language. Confirm who owns the equipment, whether a purchase option is fixed or variable and what remains payable if the site closes or the machine fails.
| Line | Purchase or financed purchase | Lease proposal |
|---|---|---|
| Initial cash | Price or down payment, fees and installation | Advance payments, deposit, fees and installation |
| Ongoing cash | Loan payments if any, service and required insurance | Rentals, separately identified service and required insurance |
| End of horizon | Remaining debt, disposal cost and realistic net resale value | Buyout or return, condition charges, freight and notice obligations |
| Tax and accounting | Advisor-confirmed treatment and timing | Advisor-confirmed classification and treatment |
| Flexibility | Cost and restrictions of sale, relocation or refinancing | Assignment, relocation, early termination and upgrade conditions |
Keep tax benefits out of the base case until checked
IRS Publication 946 states that for tax years beginning in 2026 the maximum Section 179 deduction is $2,560,000, reduced when qualifying property costs exceed $4,090,000. Eligibility, business use, income limitations and placed-in-service timing still matter. A deduction reduces taxable income; it is not a dollar-for-dollar rebate on equipment.
Ask the tax adviser to compare the available treatment for the specific purchase or lease and the entity’s circumstances, including other depreciation provisions where relevant. Do not assume used equipment always qualifies or that a document called a lease is always treated as a rental. Financing a purchase does not by itself eliminate depreciation eligibility.
The prior article’s blanket “no asset on the books” claim for an FMV lease was incorrect. FASB’s lease guidance generally requires lessees to recognize lease assets and liabilities, subject to its scope and exceptions. Have the accountant apply the reporting framework used by the business rather than infer treatment from the marketing label.
Run the cash comparison twice
First show undiscounted cash by period so the funding requirement is visible. Then, if finance uses a present-value comparison, use a consistently justified discount rate and documented residual and tax assumptions. Do not count loan principal and the full purchase price as separate costs in the same cash case. Test lower resale proceeds, delayed opening or an early exit where those are material risks.
Ask what the equipment must look like on return, who removes it and when notice must be received. Service bundled into a payment should be compared with the same work in the ownership case. Leasing does not necessarily transfer every residual or condition risk, and owning does not automatically make replacement economical.
Take matched offers to a funding decision
- Build the same-horizon cash schedule and separate equipment, service and finance charges.
- Obtain written tax and accounting assumptions, then test the material downside case.
- Choose the structure against affordability and operating need; assign the end-of-term notice and disposition owner.
Continue with FEX
FEX editorial guidance: the decision tools and operating recommendations in this guide are FEX analysis. They are not manufacturer specifications, contractual entitlements or industry benchmarks.
Source notes
- IRS Publication 946 — 2026 Section 179 limits, eligibility and depreciation rules.
- FASB lease guidance overview — Recognition of lease assets and liabilities; apply the relevant framework and exceptions.
Editorial update, October 7, 2026: Replaced secondary tax references with IRS guidance, corrected the off-balance-sheet FMV lease claim and removed automatic eligibility and residual-risk assumptions. Retained verified 2026 Section 179 limits with qualifications.
