Quick answer: Leasing is a contract to use equipment for a fixed term (e.g., 24–72 months) in exchange for predictable payments . You can often choose at the end to buy, renew, or return the asset.
Why equipment leasing deserves a spot in your financing toolkit
For Canadian SMEs, equipment is the engine of revenue—trucks move loads, excavators finish jobs, ovens serve customers, and CNC machines increase throughput. Equipment leasing lets you put those assets to work without a large upfront payment, preserving cash for fuel, payroll, materials, and marketing. It’s one of the core options in Mehmi’s Equipment Financing suite alongside Equipment Loans, an Equipment Line of Credit, and Refinancing & Sale-Leaseback.
Use the calculator to estimate monthly payments and compare term lengths and buyouts.
What is equipment leasing?
Leasing is especially useful when you need lower monthly payments, faster approvals, or regular upgrades.
Explore our dedicated page: Equipment Leases.
The main lease structures (and when to use each)
| Structure | How it works | End-of-term option | Best for |
|---|---|---|---|
| FMV (Fair Market Value) | Lowest monthly; you pay for use, not full ownership during the term. | Buy at FMV, renew, or return. | Fast-changing tech, medical/IT, or when cash flow is king. |
| Fixed or $10 Buyout | Lease-to-own path with known buyout (e.g., $10 or 10%). | Purchase for the stated amount. | Long-life assets you plan to keep (yellow iron, trucks). |
| Percentage Residual (e.g., 10%) | Lower monthly during term with a preset buyout percentage. | Buy for the preset residual or return. | Balancing affordability now with ownership later. |
| Conditional Sales Contract (CSC) | Lease-style documentation; economics closer to a loan. | Title/ownership per contract at completion. | Simple path to ownership with familiar documents. |
Learn more: Conditional Sales Contracts.
BDC’s equipment-financing guide emphasizes the complete financing structure when comparing offers.
“Don’t focus only on interest rates”
For the equipment decision discussed here, compare the amount financed, payment schedule, collateral and remaining obligations alongside the quoted rate.
Lease vs. loan vs. sale-leaseback (quick comparison)
| Option | Ownership during term | Monthly payment | Upfront cash | End of term | Typical use case |
|---|---|---|---|---|---|
| Lease (FMV) | Lessor | Lowest | Low–Moderate | Buy at FMV, renew, or return | Upgrades, cash preservation |
| Lease (Fixed/$10 buyout) | Lessor | Lower than loan (often) | Low–Moderate | Purchase for fixed amount | Keep long-term |
| Loan | Borrower | Moderate | Usually requires down payment | Own outright | Equity-building priority |
| Sale-Leaseback | Lessor (you lease it back) | Varies | Cash out at start | Buyout/renew/return | Unlock cash from owned gear |
Deep-dive pages: Equipment Loans · Refinancing & Sale-Leaseback
What drives your lease payment?
- Asset type & age – New/high-resale assets typically price better than specialized or very old units.
- Term length – Longer terms lower the monthly but raise total paid.
- Residual/buyout – A higher residual generally reduces the monthly payment.
- Rate & fees – Credit strength, time in business, and industry profile influence pricing.
- Taxes & delivery/installation – Often financeable; include them in your modelling.
- Use case & utilization – Clear revenue generation and strong secondary market help approvals.
Model scenarios with Mehmi’s calculator (e.g., 48 vs 60 months; 0% vs 10% residual).
Where leasing shines (by sector)
- Transportation & Trucking – Lower payments while growing lanes and customers. See Transportation & Trucking and Trailer Financing.
- Construction & Contractors – Match payments to project revenue and refresh gear as utilization changes. See Construction & Contractors and Construction Equipment Expertise.
- Manufacturing & Wholesale – Add capacity without depleting working capital. See Manufacturing & Wholesale.
- Hospitality & Food Service – Fit-out kitchens and FOH with lower upfront cost. See Hospitality & Food Service and Rent-to-Own (Hospitality).
- Medical, Dental & Wellness – Finance imaging/diagnostic equipment on upgrade-friendly cycles. See Medical, Dental & Wellness.
Confirm the asset you want appears on Eligible Equipment or browse our inventory.
How leasing interacts with your accounting
Most Canadian SMEs report under ASPE; larger firms may report under IFRS. Many leases today are recorded on-balance sheet, with recognition varying by standard and structure. Practically, owners focus on cash flow, after-tax cost, and upgrade timing. Always confirm tax treatment with your accountant (e.g., deductibility of lease payments vs CCA on owned assets). If you prefer to own from day one for CCA, compare against a loan on our Equipment Loans page.
Approval checklist and tips
- Basic business details (legal name, years in business, ownership)
- Recent bank statements and proof of revenue (where applicable)
- Equipment quote/invoice and spec sheet
- Down payment amount (if any) and preferred term/residual
- For startups or thinner credit, consider In-House Financing or pairing with a Working Capital Loan or Business Line of Credit to smooth operating cash.
Case study: Lease-to-own that fueled growth
Situation: A GTA logistics firm needed two straight trucks plus a liftgate retrofit before peak season. Cash was earmarked for drivers, fuel, and insurance.
Solution: Mehmi structured a fixed-buyout lease over 60 months, rolling install and delivery costs into the financed amount.
Why it worked: Payments were ~13% lower than a comparable loan; the preset buyout kept a clear path to ownership.
Result: The fleet added two routes immediately, on-time delivery SLA improved, and the firm later used a small sale-leaseback on an older unit to free up cash for a maintenance program.
FAQs: Equipment leasing for business
Is leasing cheaper than buying?
Monthly—often yes. Total lifetime cost—sometimes not, especially if you keep the asset long after the term. Compare with the calculator.
Can I lease used equipment?
Yes, subject to age/condition and resale market strength. Check Eligible Equipment or our inventory.
What credit score do I need?
Stronger credit helps, but we finance many SMEs and startups with the right structure (down payment, guarantees, or In-House Financing).
What happens at the end of the lease?
Buy for a fixed amount or FMV, renew, or return/upgrade—spelled out in your agreement. See Equipment Leases.
Can I refinance gear I already own?
Yes—use Refinancing & Sale-Leaseback to unlock cash while keeping the asset in service.
How fast can I get approved?
Approval and funding timelines vary by lender, application completeness, and required conditions. Start at Contact Us.
Ready to compare numbers?
Model lease vs loan scenarios with the Equipment Financing Calculator, then feel free to contact our credit analysts for a structure tailored to your cash flow and industry.
Are you looking for a truck? Look at our used inventory.
Authoritative references
- Innovation, Science and Economic Development Canada — Canada Small Business Financing Program:
The Canada Small Business Financing Program makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders.
Eligibility, pricing, tax treatment, and program terms can change. Verify current official guidance and final financing documents.