Thomcat Leasing logo

Get the Financing
You Need Today

Apply Now!
Secure 5 Minute Online Lease Application

Call us toll free:

1-877-THOMCAT
(1-877-846-6228)
  • Home
  • Equipment Leasing
    • The You Find It! We Finance It! Lease
    • Leasing Benefits
    • Service Promise
    • Leasable Equipment
    • Tips & Advice
    • Leasing Guide
    • Apply Now
  • Support
    • Contact Us
    • 60 Second Lease Estimate
    • Get Pre-Approved
    • Inquire About Your Current Lease
    • Apply Now
  • Equipment Resellers
    • Equipment Reseller Program
    • Equipment Reseller Toolkit
    • Create Reseller Profile
  • About Us
  • Contact Us

Equipment Lease vs. Equipment Loan

August 3, 2016 by Darryl Stroink

Equipment Lease Vs. Loan

Picking the Best Financing Model for Your Equipment Purchases

It’s pretty rare these days that a business has the free-standing cash to purchase all the equipment it needs. Prices of equipment continue to soar. Besides, it’s not always advantageous for you to tie up all your business cash into equipment.

Most people are turning to financing to get their equipment. It makes perfect sense! You’ll be earning revenue off of the equipment while you pay it off. Not too mention breaking a large sum into smaller manageable payments.

Should you get an equipment lease or an equipment loan? Do you turn to a lease broker? Or do you talk to your bank for a loan?

You might not think there is much of a difference between a lease or a loan. In some regards, you’d be right. Both get you the financing you need. In other ways, the details can really matter.

Let’s take a look at equipment leases vs. equipment loans, and explore what those differences mean.

Lease vs. Loan

Lease Loan
Payment Terms Flexible. Monthly, semi-monthly, bi-monthly, annual, quarterly, and seasonal. You can usually arrange to skip payments as well. This helps you match payments to your cash-flow. Standardized. Monthly payments are the most common form of loan repayment. However, you can sometimes arrange alternative regular interval payments.
Equipment Ownership The lessor owns the equipment. You can decide to take ownership for $10 or 10%. There are a number of different end of term options. You own the equipment and take all ownership responsibilities.
Down Payments Usually you don’t need a down payment. Usually you will need a down payment of 5-20%.
Collateral Requirements The leased equipment is the collateral. Usually you don’t need anything else to serve as collateral. Depending on your credit, you may be required to pledge additional assets as collateral.
Maintenance You will usually be responsible for equipment maintenance costs. All maintenance and repair costs are your responsibility.
Payment Amount

Be careful comparing simply the payment amount because payments are easily manipulated by the other terms (down payment for example).

Usually you can get a payment that suits you.

Tax Benefits Your entire lease payments are deductible as a business tax expense. Only the interest portion of your payments are deductible as a business expense. However, you also can claim the yearly CCA (capital cost allowance) portion (rates set by CRA).
GST/HST Input Tax Credit (ITC) & PST The GST/HST of the equipment purchase is spread out over the entire lease term. Therefore, you will be able to claim a small ITC from every payment.

If you trade equipment prior to the end of lease, you save from having not paid all the PST.

The GST/HST of the equipment is all paid up front. Therefore, you can claim one large ITC at the time of purchase.

Sometimes, the GST/HST is rolled into the loan amount. In those situations you might not get any ITC.

All PST is due up front and could make for a higher financed amount.

Line of Credit Effect Usually your debt load and line of credit limits are unaffected. That’s because you didn’t actually borrow any money. The amount you borrow will be registered on your credit reports showing your debt load. This does not impact your credit score negatively, but it does reduce your line of credit limit.
Obsolete Equipment Protection You are not obligated to own the equipment at the end of the lease and can trade up at anytime. This makes it very easy to “trade-up” to more modern equipment whenever you need to. You own the equipment. This means you’ll be responsible for reselling the equipment, regardless of whether it is valuable or obsolete.
Approval Length Leases are actually quite simple and self-contained. This allows approvals to come through in literally minutes. It can, however, take a little bit longer on higher value and riskier credit leases. Banks are not built for speed and they like to dig deep into your financial statements before lending money. While it is possible to get approved quickly, usually it takes weeks. High debt or poor credit rating will make securing a loan very difficult.

Please consult your accountant to understand your entire tax & financial benefits and responsibilities.

Should You Lease or Loan Your Equipment?

What is your verdict? Is it more beneficial for your company to lease equipment, or seek a bank loan?

Both leases and loans serve a purpose. It often comes down to whichever format gives you the most benefits.

If you are interested in pursuing the equipment leasing direction, Thomcat Leasing works with Canada’s top lenders to get you the lowest payments available. Our personal service and deep industry knowledge guarantees that you’ll get the right lease for you.

Get a quick lease estimate right now and see how affordable leasing is for you!

Get My Lease Estimate!

Equipment Leasing Guide

Want to know how to make leasing work for you? Get straight down to business with our equipment leasing guide where we’ll give you advice for every stage of the process.

Filed Under: Equipment Leasing

3 Easy Steps to Affordable Equipment Financing

Step 1 - Find It!
Go shopping.
New or used equipment.
Step 2 - Discover

See how affordable Lease Financing is :

Get My Lease Estimate Now
Step 3 - Finance It!
Start My 5 Minute Online Application

What Our Clients Say

I spent 3 days dealing with my bank and accountant to get my equipment finance approved. Thomcat got it done in hours and at a better rate than the bank. I definitely will continue using Thomcat for my business financing needs.
– E.C. Excavating

Thomcat Leasing is a CFLA Member

Are You Selling Equipment?

You can sell your equipment faster and avoid sticker shock by offering your buyers a Thomcat Leasing solution. If you're an equipment reseller, this program is just for you.

Equipment Reseller Program →

Connect with us

Phone Thomcat Leasing Phone:
1-877-846-6228
250-590-2763

Text:
416-457-6403

Phone Thomcat Leasing Email:
info@thomcatleasing.ca

Facebook
Google

Quick Links

  • Home
  • About Us
  • Tips & Advice
  • Contact us

Leasing

  • You Find It! We Finance It! Lease
  • Small Business Lease Guide
  • Leasing Benefits
  • Service Promise

Equipment

  • Leasable Equipment
  • Equipment Resellers
  • Apply now!

Get Started Today

  • Inquire about your current lease
  • Get a Quick Lease Estimate
  • Apply now!

Terms & Conditions | Privacy Policy

Copyright © 2023 Thomcat Equipment Ltd. | All Rights Reserved
859 Station Ave., Victoria, BC  V9B 2S2

Website by: devEdge Internet Marketing