Average Equipment Loan Rates in Canada (2025)

When owners ask for the “average interest rate” on an equipment loan, they’re really asking two things: what most businesses pay today and what they will likely pay given their profile. In Canada, approved small–mid sized businesses commonly see about 7%–14% APR on equipment loans, while leases often map to a ~7%–13% cost band depending on credit, asset type, term, and structure. The spread exists because lenders price risk (credit, time in business, cash flow) and collateral strength differently across industries.

Below is a practical guide—how rates are formed, what moves them up or down, and the fastest ways to get your payment where it needs to be. If you already have a unit in mind, run quick scenarios with our Equipment Financing Calculator and compare outcomes for loans versus leases.

How lenders typically price equipment loans

Lenders start with a cost-of-funds baseline and add risk and servicing margins tied to your file. That’s why two firms with the same asset can receive different offers.

Here’s a directional view of where Canadian borrowers tend to land:

Key drivers: personal/business credit, time in business, bank cash flow, equipment age/resale strength, down payment, guarantors, and overall leverage.

What moves your rate (and payment) the most

• Credit & time in business: Strong, consistent repayment history lowers risk and, therefore, rate.
  
  
• Asset risk: Newer, liquid assets (tractors, common construction machinery) often price better than niche or end-of-life assets.
  
  
• Structure: Terms (24–84 months), down payment size, and whether you use a residual/buyout on a lease meaningfully shift payment and total cost.
  
  
• Cash flow strength: Clean bank statements and debt-service coverage drive offers.
  
  
• Lender type: Bank/government-backed channels can be cheaper but stricter; specialty lenders move faster and flex more.
  
  
• Refinance options: Pairing a purchase with refinancing & sale-leaseback on owned assets can improve approval odds and terms.
  
  

If you want a revolving option for multiple purchases across the year, compare a dedicated equipment line of credit.

Loan vs. lease: which path yields the “best” rate?

The lowest monthly payment isn’t always the lowest effective cost. Loans build equity steadily; leases can defer principal via a residual.

Explore options:

• Equipment Loans
  
  
• Equipment Leases
  
  
• Equipment Line of Credit
  
  

How to lower your effective cost without starving cash flow

• Use a smart residual: Leasing with a modest buyout (e.g., 10%) can trim monthly outlay while keeping an ownership path.
  
  
• Right-size the term: Extending from 48 to 60 or 72 months reduces payment; just watch total interest and asset life.
  
  
• Mix in collateral: Pair a purchase with asset-based lending on receivables/inventory to support working capital.
  
  
• Unlock trapped equity: If you own gear, a sale-leaseback can inject cash and improve approval odds on the new unit.
  
  
• Consolidate repairs: Spreading a major fix through truck repair financing can stabilize monthly obligations.
  
  
• Down payment & guarantors: More equity or a strong guarantor typically buys a better rate.
  
  

Run the impacts instantly with the calculator—toggle term, residual, and down payment to see deltas in seconds.

Industry-specific rate realities

Different sectors carry different risk/remarketing dynamics:

• Transportation & trucking: Common assets, strong resale channels. Start here if you’re adding a tractor, day cab, or trailer: Transportation & Trucking.
  
  
• Construction & contractors: Excavators, loaders, lifts—usage hours and maintenance history matter: Construction & Contractors and Construction Equipment Expertise.
  
  
• Manufacturing & wholesale: Heavier tickets (CNC, processing). Consider combining term loans with asset-based lending: Manufacturing & Wholesale.
  
  
• Hospitality & food service: Kitchen/POS upgrades benefit from lower upfront via lease/residual: Hospitality & Food Service.
  
  
• Medical, dental & wellness: Specialized equipment with strong revenue tie-ins: Medical, Dental & Wellness.
  
  
• Farming & agriculture: Seasonal cash flows; match term to harvest cycles: Farming & Agriculture.
  
  

Buying from Mehmi? We sell equipment directly—review live units here: Inventory.
Are you looking for a truck? Look at our used inventory.

Case study: reducing the rate and the payment—without cutting scope

Situation: A Toronto contractor needed a used wheel loader (~$165k) plus attachments. The best external quote was an 60-month loan at a double-digit APR due to short time in business.

Approach with Mehmi:

• Modeled loan vs. lease with 10% residual in the calculator.
  
  
• Executed a small sale-leaseback on an owned skid steer to shore up cash flow.
  
  
• Shifted the new loader into a lease with residual to lower the monthly while preserving an ownership path.
  
  

Outcome: Monthly payment dropped materially versus the original loan quote, cash reserves improved, and the company won a municipal contract that required both attachments—without stretching day-to-day liquidity.

What to do next

• Price out the unit you want using the calculator (try 48 vs. 60 months, loan vs. lease, with and without residual).
  
  
• If you own equipment, consider unlocking equity to strengthen the file via refinancing & sale-leaseback.
  
  
• Ready to formalize a quote? Feel free to contact our credit analysts via Contact Us. We typically provide structured options within 24–48 hours.
  
  

FAQ

What is the average interest rate on an equipment loan?
Most approved Canadian SMEs see ~7%–14% APR on loans; leases often map to ~7%–13% effective cost, driven by credit, asset, and structure.

Are rates fixed or variable?
Both exist. Fixed terms are common for loans/leases; revolving facilities like an equipment line of credit can be variable.

Can startups qualify at reasonable rates?
Yes—with down payment, collateral or guarantor support, solid projections, and sometimes in-house financing.

Do used assets cost more to finance?
Often slightly, due to depreciation/remarketing risk—but structure (term/residual) can offset the impact.

Should I lease or get a loan?
If you’ll keep the asset long-term and want straight-line ownership, start with a loan. If cash flow is king or tech changes fast, compare a lease with a modest residual.

What if I also need working cash for ramp-up?
Blend your equipment facility with a Working Capital Loan or Invoice/Freight Factoring to cover launch costs and slow receivables.

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