Leasing vs. Financing: Best Option for Your Business

Choosing between leasing and financing equipment or vehicles is one of the most important decisions Canadian business owners face. Whether you run a construction company in Ontario or manage a fleet of trucks in Alberta, the choice you make affects your cash flow, taxes, and growth potential.

This guide breaks down the differences between leasing and financing, explains how each option impacts your balance sheet, and helps you determine which strategy is right for your business.

What Is Leasing?

Leasing is a way to rent equipment, vehicles, or other assets for a fixed period without owning them.

• Lessor: Owns the asset (usually a leasing company)
• Lessee: Your business, which pays regular instalments to use it
• End of Term Options: Return, renew, or purchase the asset

Benefits of Leasing:

• Lower upfront cost
• Access to newer technology
• Predictable expenses
• Often includes maintenance or service packages

Leasing is popular in fast-evolving industries like transportation, logistics, and healthcare where asset turnover and tech upgrades are common.

👉 Explore truck and equipment leasing options

What Is Financing?

Financing involves borrowing money to purchase an asset outright. Your business owns the asset and repays the loan over time, usually with interest.

Benefits of Financing:

• Full ownership at end of term
• Builds equity and company value
• Can use the asset as collateral
• Eligible for capital cost allowance (CCA) tax deductions

Financing is ideal for businesses with long-term needs—such as owning heavy machinery or trucks that hold value over time.

👉 Need funding for asset purchase or buyout?

Balance Sheet Impact: Leasing vs. Financing

Leasing:

• No asset or liability added (for traditional operating leases)
• Payments recorded as operating expenses
• Can improve debt-to-equity ratio and ROA
• Keeps your balance sheet “light,” appealing to lenders and investors

Financing:

• Adds asset and liability to your balance sheet
• Asset value increases equity, loan increases liabilities
• Over time, loan payments reduce liability and build ownership
• Shows long-term investment in core operations

Tip: Under new accounting standards (like IFRS 16), many leases may still appear on your balance sheet. Always consult with an advisor.

Key Comparison Table

Here’s a simplified breakdown to help you compare:

Key Considerations When Choosing

1. Cash Flow

• Leasing keeps capital available for other business needs.
• Financing requires more upfront, but builds long-term value.

2. Asset Usage & Life Cycle

• If equipment needs frequent upgrades (like trucks or medical gear), leasing offers flexibility.
• If asset lifespan is long and stable (like machinery or trailers), financing offers better ROI.

3. Tax Strategy

• Leasing: Entire payment may be deductible as an operating expense.
• Financing: You can claim capital cost allowance (depreciation) and deduct loan interest.

→ Speak with a financial advisor to optimize tax implications.

4. Industry Trends

• Fast-changing sectors like tech or logistics may prefer leasing.
• Sectors like manufacturing or construction may benefit from financing and ownership.

Real-World Scenarios

✅ Scenario 1: A Tech-Driven Start-Up

A Toronto-based delivery tech company needs a fleet of electric vehicles but wants to stay lean. Leasing gives them flexibility to:

• Rotate into newer, more efficient models annually
• Avoid upfront capital investment
• Maintain low liabilities to attract venture funding

✅ Scenario 2: A Manufacturing Firm in Ontario

A wood fabrication company needs CNC machines that will last 15+ years. They opt to finance:

• Full asset ownership
• Claim depreciation for tax relief
• Use the equipment as collateral for future loans

Mehmi Financial Group: Your Partner in Asset Strategy

Whether you’re comparing leasing and financing for trucks, equipment, or fleet expansion, Mehmi Financial Group provides fast, flexible funding solutions tailored to Canadian businesses.

Why Work with MehmiGroup.com?

• Access to 30+ national lenders
• Up to $5M funding in 48 hours
• Options for leasing, refinancing, or working capital
• Trusted by trucking, construction, medical, and food service businesses

👉 Use our calculator to estimate your monthly payments
👉 Apply now or request a consultation

FAQs

Is leasing or financing better for small businesses in Canada?
Leasing helps preserve cash flow and offers flexibility. Financing is ideal for long-term investments where ownership matters.

What are the tax benefits of each?
Lease payments are typically deductible as operating expenses. Financed assets offer depreciation and interest deductions.

Can I switch from a lease to financing?
Yes—ask about lease-to-own or TRAC lease options where you can finance the buyout.

Is it easier to get approved for leasing or financing?
Leasing generally has fewer requirements and faster approvals, especially for new businesses.

Conclusion

Leasing and financing both offer powerful benefits—but the best choice depends on your cash flow, tax strategy, asset lifespan, and long-term goals.

If you need flexibility and want to minimize risk, leasing may be right for you. If you want to build equity and plan to use the asset for years, financing might be the better path.

Let the experts at Mehmi Financial Group help you evaluate your options with confidence.