Types of Equipment Financing
Almost every equipment deal is one of five structures. The right choice comes down to three questions: do you want to own the equipment, how much monthly payment can you carry, and which tax treatment fits your books. Here is the honest map.
Two of the five are ownership deals (the loan and the balloon), one is a loan in lease clothing (the $1 buyout), and two are true leases where payments are often fully deductible as an operating expense (TRAC and FMV). None of them is universally best. The winner depends on how long you keep the machine and how much cash flow you need this year.
| Structure | Ownership | Monthly payment | End of term | Tax angle |
|---|---|---|---|---|
| Equipment loan | Day one | Highest of the ownership deals | Nothing. You already own it | Section 179 and depreciation |
| Balloon loan | Day one | Lower, with 20-30% due at the end | Pay, refinance, or trade to cover the balloon | Section 179 and depreciation |
| $1 buyout lease | Effectively day one | Same as a loan | Buy it for $1 | Often treated like a purchase |
| TRAC lease | After paying the residual | Low; a fixed residual is set aside | Buy, refinance, trade, or settle the adjustment | Payments often 100% deductible |
| FMV lease | Never, unless you buy | Set by a rate factor, not an APR | Return it, buy at market value, or extend | Payments often 100% deductible |
The short version: keeping the machine for a decade points to a loan or $1 buyout. Running trucks over 10,000 lbs with an eye on cash flow points to a TRAC. Refreshing equipment on a cycle points to FMV. Needing the smallest payment now with a plan for later points to a balloon. Then prove it with numbers: run the same deal through every structure in our equipment payment calculator and compare total cost of ownership, not just the monthly payment. When you are ready for real numbers from real lenders, get an equipment financing quote.
Equipment Loan
Own it from day one with fixed payments and the equipment as collateral.
TRAC Lease
Lower payments on vehicles over 10,000 lbs, with a set buyout at the end.
Fair Market Value Lease
A true rental with a walk-away option, built for fast-depreciating gear.
$1 Buyout Lease
Lease in name, loan in practice. Own the equipment for a dollar at term end.
Balloon Payment Equipment Loan
Smaller payments now, one big payment at the end. Owns like a loan.