Calculate ROI on Financed Equipment

You’re thinking about financing a new CNC machine, truck, or commercial oven.

But before you sign the loan agreement, pause and ask:
“Will this investment actually pay off for my business?”

At Mehmi, we believe financing should be more than just affordable. It should be profitable.

This guide shows you how to calculate return on investment (ROI) for financed equipment—so you can make strategic decisions based on data, not guesswork.

What Is ROI in Equipment Financing?

Return on Investment (ROI) is the financial benefit your business gets from purchasing equipment—after accounting for the cost of financing it.

Put simply:

Is the revenue or savings you generate greater than the total loan cost?

The Basic ROI Formula (For Financed Equipment)

Here's a simple way to calculate ROI:

ROI (%) = (Net Profit from Equipment – Total Loan Cost) ÷ Total Loan Cost × 100

Where:

• Net Profit = Additional revenue or savings the equipment generates
• Total Loan Cost = Total interest + fees + any balloon/buyout payment

A positive ROI means the equipment is paying you back—and then some.

Step-by-Step ROI Example: Manufacturing Upgrade

Scenario:
A machining company in Ontario finances a $150,000 CNC machine.

• Loan Term: 60 months
• Interest Rate: 9%
• Monthly Payment: $3,115
• Total Loan Cost: $3,115 × 60 = $186,900

So the total financing cost is:
$186,900 – $150,000 = $36,900 in interest and fees

Now, what does the equipment earn?

Let’s say the machine adds:

• $5,000/month in revenue from new orders
• $1,000/month in labour savings
• Total monthly gain: $6,000

Over 5 years:
$6,000 × 60 = $360,000 in added value

Net Profit from Equipment = $360,000 – $186,900 = $173,100

Now plug it in:

ROI = ($173,100 ÷ $186,900) × 100 = 92.6%

Result: Nearly 93% return over five years.

Other ROI Scenarios to Consider

Even if the asset doesn’t directly generate new revenue, it might:

• Reduce downtime (saving money on repairs or missed work)
• Increase efficiency (handle more volume with fewer people)
• Boost compliance or safety (avoiding costly fines or legal issues)
• Support expansion (enabling a new product line or market)

Make sure to include all sources of financial benefit in your ROI calculation.

Financing Tips That Improve ROI

✅ Negotiate vendor pricing before you finance
✅ Choose term lengths that align with asset lifespan
✅ Structure for early payoff flexibility (if cash flow improves)
✅ Consider used equipment if ROI works at a lower cost
✅ Don’t over-finance—fund what you truly need

Explore: Leasing & Loans

Real Case Study: Food Truck ROI Analysis

Business: Mobile taco truck in British Columbia
Need: $92,000 to purchase a used truck and install a commercial-grade kitchen
Loan: 60 months at 11.5%, monthly payments of $2,030

Added Value:

• Sales from truck: ~$8,000/month
• Net profit after food/labour: ~$3,000/month

Over 5 years:

• Total profit = $3,000 × 60 = $180,000
• Total loan cost = $2,030 × 60 = $121,800

ROI = (180,000 – 121,800) ÷ 121,800 × 100 = 47.7%

Result: Solid ROI, plus asset ownership at end of term.

FAQs: ROI on Financed Equipment

Should I include tax write-offs in ROI?
Not in the core formula—but tax savings (e.g. CCA or interest deductions) improve your real after-tax return. Talk to an accountant to factor them in.

What if my ROI is negative?
That’s a red flag. Reconsider the equipment, price, or how you're using it. You may need to shop smarter or structure a better deal.

Can Mehmi help me estimate ROI?
Yes. Our credit analysts often help clients understand how payments align with cash flow and revenue goals.

Final Word: Don’t Just Finance—Invest Strategically

Equipment financing is a tool—but ROI is your compass.

Before you sign a loan, ask:

• What does this asset help me do better or faster?
• What’s the monthly value it brings in or saves?
• Does that outweigh the cost of financing?

When the math adds up, you’re not just borrowing—you’re building a smarter business.

Want to calculate the ROI on your next equipment purchase?
Talk to a credit analyst or use our financing calculator to model real payment plans based on your quote.

‍

‍