# Equipment leasing or an equipment loan: which one?

Who owns the machine, how the payments and sales tax fall, what happens at the end, and how to choose between a lease and a loan in Canada.

Published: 2026-09-25 · Spark

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Both spread the cost of a machine over the years it earns. The difference is who owns it, and that difference touches the payments, the sales tax, your books and what happens at the end.

## The short version

- **An equipment loan:** you own the machine from day one. The lender registers its interest against it until the loan is paid.
- **A lease:** the lessor owns the machine and you pay to use it. At the end, you may buy it, return it, renew, or upgrade.

## How the payments compare

**Loans** are usually repaid in level payments over a term matched to the machine's working life. A deposit may be asked for, especially on used equipment or for a younger business.

**Leases** often need little or nothing up front beyond the first payment or two, which keeps cash in the business. Some leases have lower monthly payments because the lessor expects the machine to be worth something at the end — which is only a saving if you are happy to hand it back.

Compare the two on the **total you pay** over the term, plus what it costs to own the machine at the end if you intend to keep it. The [business loan calculator](/business-loan-calculator) will do the arithmetic for a loan.

## Sales tax: when it is paid

On a **purchase**, GST/HST (and PST where it applies) is charged on the full price up front. A GST/HST-registered business can usually claim it back as an input tax credit, but it still has to find the cash first.

On a **lease**, sales tax is charged on each payment instead, so it is spread over the term.

For most businesses that can recover the GST/HST, this is a question of timing. For businesses with restricted input tax credits — some healthcare and financial businesses, for example — it can affect the real cost. Ask your accountant.

## Taxes and the books

In broad terms:

- With a **loan**, you own the asset. You generally deduct the interest, and claim the cost over time through capital cost allowance (CCA).
- With a **lease** that is a true rental, the lease payments are generally deducted as an expense.
- Some leases are treated as a purchase for tax and accounting purposes, depending on how they are structured.

The rules, and the accelerated write-offs available for some kinds of equipment, change from year to year. This is one to run past your accountant with the actual quote in hand.

## What happens at the end

Read this part of any lease before you sign:

- **A buyout at a set price** — including a nominal $1 or $10 — makes the lease behave much like a loan.
- **A buyout at fair market value** means the price is decided later, and can be more than you expect.
- **Return conditions**: hours, wear, where and how it is returned, and what happens if the machine does not meet them.
- **Automatic renewal** if you do not give notice in time.

## Which one to pick

**A loan usually fits when:**
- You will run the machine for most or all of its life
- You want to own it outright and build equity in it
- It is used equipment, or a private sale

**A lease usually fits when:**
- The equipment goes out of date quickly — technology, some medical and diagnostic equipment
- You expect to upgrade on a cycle
- Keeping cash in the business up front matters more than the total cost

Whichever you choose, arrange it against the quote before the order goes in, not after delivery. [Equipment financing](/capital/equipment-financing) covers how it works with us, and [construction equipment financing](/guides/construction-equipment-financing) covers heavy equipment specifically.