Soft costs in Canadian equipment leases: install, freight, training & warranties

Meta title: Soft costs in equipment leases Canada
Meta description: Learn how soft costs like install, freight, training and warranties work in Canadian equipment leases – when to roll them in and when to pay cash.

Soft costs like installation, freight, training, and extended warranties can easily add 20–30% to the price of new equipment – and in Canada, many lessors will happily roll them into your lease.(jocovafinancial.com) The real question isn’t “can we finance them?” It’s which soft costs should you finance, over what term, and when does it quietly cost you more than it should?

This guide breaks down exactly how soft costs work in Canadian equipment leasing, how underwriters see them, how CRA treats them, and how Mehmi typically structures them so your lease supports your business instead of bloating it.

What counts as “soft costs” in an equipment lease?

Soft costs are the non-hardware expenses that come with putting new equipment into service – everything that makes the asset usable but isn’t the machine itself.

Typical soft costs that show up on Canadian invoices:

Freight, delivery, and rigging
Installation and commissioning
Electrical, plumbing, or minor leasehold work tied to the install
Initial operator training and vendor set-up
Extended warranties, maintenance plans, and support contracts
Software licences or integrations directly tied to the equipment
Environmental fees, disposal of old equipment, and sometimes permits

Canadian lenders and leasing firms explicitly note that soft costs such as installation, delivery, maintenance agreements, sales tax, shipping and training can often be capitalized in the lease along with the hard cost.(accordfinancial.com)

That’s how you end up with “more than 100% financing” on a lease – you’re not just financing the machine; you’re financing everything it takes to get that machine earning.

At Mehmi, when we structure equipment leases, we usually start by separating the quote into:

Hard costs – the equipment itself
Soft costs – everything else

Then we decide what truly belongs in the lease and what might be better handled with cash or a short-term working capital tool.

Equipment Leases

How Canadian lessors treat soft costs in equipment leases

Most Canadian lessors can include soft costs – but they don’t all do it the same way, and they rarely fund 100% soft costs without hard assets behind them.

Common lender approaches

In practice, we see a few patterns:

Bundled soft costs up to a percentage of the deal
- Many lessors are comfortable rolling in a reasonable amount of freight, install and training – often 10–25% of the total amount financed, as long as the hard asset still drives the value.(accordfinancial.com)
Above-100% financing from banks and term lenders
- Bank and development lenders like BDC openly advertise financing up to 125% of equipment cost specifically to cover extra expenses such as transportation, shipping, installation and employee training.(BDC.ca)
- That’s more common on equipment loans, but the same logic often shows up in lease programs: use a strong asset as collateral to fund the whole project, not just the sticker price.
Full bundling for small and mid-sized deals
- Some private lessors and specialist programs will routinely include freight, installation and training as part of their standard lease offering, especially in sectors like transport and hospitality.(cdlcorp.ca)
Tighter rules on warranties and software
- Multi-year extended warranties, maintenance contracts and software subscriptions get more scrutiny. These can often be included but may face caps or shorter terms because they don’t help resale value in the same way the equipment does.

Mehmi’s role is usually to translate your vendor quote into lender language – flagging soft cost items, finding out how much each funder will accept, and deciding if some pieces should move into a separate facility like a working capital loan or merchant cash advance instead of overloading the lease.

Working Capital Loan
Merchant Cash Advance

Why soft costs matter so much: they can be 20–30% of the project

Soft costs don’t feel like a big deal line by line, but they add up. Canadian equipment finance comparisons estimate that transport, installation, maintenance and training can easily add 25–30% to the value of a project.(jocovafinancial.com)

For a $200,000 piece of equipment, that means:

$200,000 – machine
$20,000–$40,000 – freight, rigging, installation
$10,000–$20,000 – training, extended warranty, software, minor construction

Total project: $230,000–$260,000

If you only finance the hardware and try to cash-fund everything else, you may:

Delay the project while you accumulate cash
Cut corners on training, commissioning, or warranty
Starve day-to-day working capital

That’s why many of Mehmi’s clients deliberately bundle key soft costs into their lease while still keeping an eye on term and structure.

Equipment Financing Overview

Which soft costs should you finance – and which should you pay cash?

You don’t have to treat soft costs as “all or nothing.” Some belong in the lease; some are better covered by working capital or a shorter-term solution.

Good candidates to roll into the lease

These usually make sense to finance alongside the asset:

Freight and rigging – The equipment is worthless until it’s in your building. CRA also recognizes delivery and freight as normal business expenses.(Canada)
Installation and commissioning – Electrical, plumbing, calibration and vendor start-up that directly attach to the asset.
Initial operator training – Especially for complex or regulated equipment (medical devices, CNC machines, industrial ovens).
Vendor-required software or controllers – If they’re integral to the machine and have a similar life span.

Canadian lessors and brokers explicitly say delivery, installation and training are soft costs that can be financed within the same lease, effectively providing greater than 100% financing.(accordfinancial.com)

Mehmi typically likes to bundle these core enablement costs with the hardware – they directly increase the productive life and value of the asset.

Soft costs to think twice about financing

These deserve a closer look:

Long-term warranties and maintenance contracts
- If you’re buying a 3-year extended warranty but signing a 72-month lease, you’re paying interest for six years on something that expires in year three.
Non-essential décor or cosmetic work
- Wall finishes, branding, furniture that will be refreshed long before the lease term ends – especially in hospitality and retail.
General marketing or consulting bundled into “project fees”
- Valuable, but they behave like current expenses, not capital assets.
Standalone software subscriptions
- Yearly SaaS fees are better treated as operating expenses or financed on a shorter cadence.

In those cases, Mehmi will often:

Keep the lease focused on hard assets plus core install/freight
Use a working capital loan, line of credit, or Rent Try Buy structure for softer, shorter-life pieces instead of pushing everything into one long lease.

Line of Credit
Rent Try Buy – Hospitality

How underwriters look at soft costs inside a lease

From a credit perspective, soft costs are mostly about recoverability and leverage. If your lease goes sideways, the lessor can resell the hardware – but they can’t repossess training hours or freight.

Underwriters typically ask:

What percentage of the total ticket is soft vs hard cost?
Are the soft costs essential to making the asset productive?
Does the transaction stay inside their advance guidelines (e.g., 100% of hard cost + up to X% soft)?
How does the structure compare to regulatory programs like the Canada Small Business Financing Program (CSBFP), which caps how much of a facility can go to related costs within its overall equipment/leasehold limit?(ISED Canada)

Files with high soft cost content often trigger:

Requests for higher down payments
Shorter terms
Or a suggestion to split the project into a lease plus a separate working capital facility

This is where Mehmi’s asset-based lending approach helps. If the hard equipment has strong residual value, we can sometimes lean on that strength to support a sensible level of soft costs – without crossing red lines that make underwriters nervous.

Asset Based Lending

How CRA treats soft costs in leases (high-level tax view)

Tax is always case-specific, but there are some consistent Canadian rules around soft costs and leasing:

CRA allows businesses to deduct lease payments incurred in the year for property used to earn income.(Canada)
CRA also says you can deduct reasonable current expenses like delivery, freight and express that relate to your business.(Canada)
Generally, any reasonable business expense incurred to earn income is deductible, subject to capital vs current expense rules.(Canada)

So what happens when soft costs are inside the lease?

From your perspective, they’re simply part of the lease payment – which is usually deductible if the equipment is used to earn business income.(Canada)
You may be effectively deducting those soft costs over time as part of the lease, rather than expensing them all in year one.

In some cases, especially with $1 or low-percentage buyout structures, your accountant may decide the lease is effectively a financing arrangement:

The equipment is capitalized and depreciated via CCA
A portion of each payment is treated as interest (deductible as current expense)

In that scenario, soft costs that form part of the asset’s capital cost may be captured in the CCA base rather than in a single-year expense.

Bottom line:

CRA is comfortable with soft costs like freight and training as deductible business expenses when they’re reasonable and tied to earning income.(Canada)
Whether you deduct them up front or over time depends on your lease structure and accounting treatment.

Mehmi’s advice is always the same: we’ll structure the financing; your accountant should bless the tax treatment.

Common mistakes Canadian SMEs make with soft costs

Soft costs are where otherwise good leases quietly become expensive. A few patterns we see all the time:

1. Financing short-life costs over long terms

3-year warranty in a 7-year lease
One-time training spread over 72 months
Décor and signage financed like a 10-ton excavator

Every extra year adds interest on something that’s no longer delivering value. In a mid-single to high-teens interest environment, that’s real money.(Medium)

2. Paying interest on sales tax and avoidable fees

Rolling HST, delivery and admin fees into the lease is convenient – but it also means you’re paying interest on that tax for the entire term. Sometimes we’ll keep key soft costs in the lease but recommend you cash-fund tax and certain fees if your liquidity allows.

3. Bundling “nice-to-haves” with must-have equipment

When everything from marketing retainers to décor is bundled into one “easy payment”, underwriters get nervous, and you end up with a bloated lease that’s hard to refinance or restructure later.

4. Not matching soft cost strategy to industry reality

Restaurants refreshing every 3–5 years shouldn’t finance décor over 7.
Transport fleets with intense kilometre usage shouldn’t build huge warranty packs into very long terms.
Clinics upgrading imaging tech every 5 years shouldn’t stretch software and training over 72 months.

Mehmi’s sector-specific experience – from transportation to hospitality to healthcare – helps keep these mismatches in check.

Transportation Expertise
Industries

Smart ways Mehmi structures soft costs in real deals

In practice, we rarely see a clean “all in” or “all cash” approach. Instead, we use a few patterns that balance cash flow, tax, and risk.

Pattern 1: Core soft costs in the lease, extras in working capital

Lease includes: equipment + freight + install + essential training
Short-to-medium working capital loan covers: marketing, minor renovations, extra staff during ramp-up

This keeps the lease focused on items that match the asset’s life while giving you enough liquidity to actually use the asset properly.

Working Capital Loan

Pattern 2: Sale-leaseback + soft cost bundling

If you already own equipment free and clear:

Refinancing / sale-leaseback generates cash from existing assets
New lease finances only the new asset and essential soft costs
Remaining project costs are covered from released equity instead of overloading the new lease

Refinancing or Sales Leaseback

Pattern 3: Hospitality bundle with Rent Try Buy

For restaurants or cafés:

Lease or Rent Try Buy covers: key kitchen gear, POS, critical install, and training
Shorter term reflects faster change in décor and concept
Optional buyout at the end of the term once the concept proves itself

Rent Try Buy – Hospitality

Pattern 4: Transport & repair blend

For fleets:

Truck and trailer financing covers hard assets and core install/freight
Truck repair financing and line of credit handle rebuilds, unexpected repairs, and non-capital work instead of rolling everything into the lease

Truck and Trailer Financing
Truck Repair Financing
Line of Credit

Across all of these, the Mehmi difference is simple: we treat soft costs as a design variable, not an afterthought.

Anonymous case study: the $40,000 of soft costs that almost killed a good deal

Business: Multi-location dental group in Ontario
Project: New CBCT imaging unit and digital workflow for one clinic

The initial quote

The vendor’s bundled quote:

$280,000 – imaging unit and hardware
$40,000 – freight, installation, renovation work, training, and a 5-year extended warranty
Total: $320,000

Vendor financing proposal:

84-month lease, all-in
Single blended payment
No breakdown of how much of that payment was hardware vs soft costs

The monthly number looked manageable, but the owner’s accountant was uneasy with:

Very long term on equipment in a fast-moving tech category
Rolling 5-year soft costs (training, warranty) into a 7-year structure

Mehmi’s review and restructure

When the file came to Mehmi, we broke the quote apart and:

Separated soft costs into:
- Essential (freight, install, commissioning, initial training)
- Optional / shorter-life (renos, extended warranty, some décor)
Modelled two scenarios:
- Vendor-style “all in” lease, 84 months
- Mehmi structure:
  - 60-month equipment lease including essential soft costs
  - 36-month working capital facility for renos and part of the extended warranty
Ran the numbers through Mehmi’s calculator to compare:
- Total interest across both options
- End-of-term positions
- Cash flow impact in years 1–3

The outcome

The Mehmi structure:

Increased the core lease payment slightly vs the 84-month vendor option
Reduced total interest paid materially over the life of the equipment
Matched the warranty and renovation financing to their actual useful lives
Gave the accountant a cleaner split for CCA vs expenses

The owner’s comment:

“We assumed throwing everything into one lease was simpler. No one had shown us how much that convenience actually cost over seven years.”

That’s exactly the point: soft costs are where good projects quietly get overpriced. When you separate and structure them properly, the same project becomes safer and cheaper.

FAQ: Soft costs in Canadian equipment leases

1. What are “soft costs” in an equipment lease?
Soft costs are the non-hardware expenses tied to getting your equipment up and running – things like freight, delivery, rigging, installation, initial training, extended warranties, and sometimes software or minor construction. Canadian lenders and brokers note that delivery, installation and training are common soft costs that can be rolled into the lease alongside the equipment itself.(accordfinancial.com)

2. Can I finance installation, freight and training in a Canadian equipment lease?
In many cases, yes. Canadian leasing firms and term lenders explicitly state that installation, shipping and training can be financed as part of the overall equipment transaction, sometimes up to 125% of the equipment cost.(BDC.ca) Most lessors will cap soft costs as a percentage of the total deal and want to see that these costs are truly necessary to make the equipment productive.

3. Are soft costs like install and freight tax-deductible in Canada?
Yes, generally. CRA says you can deduct reasonable current expenses you incur to earn business income, including delivery, freight and express costs, and it allows deductions for computer and equipment leasing costs.(Canada) When soft costs are embedded in a lease, you typically deduct them over time as part of your lease payments or via CCA/interest if the lease is treated as a financing arrangement. Always confirm specific treatment with your accountant.

4. Is it a good idea to roll extended warranties and maintenance plans into my lease?
It depends on term and asset. If your lease term roughly matches the warranty period (say, a 5-year warranty in a 5-year lease), bundling can make sense. But financing a 3-year warranty over 7 years means you’re paying interest for four extra years on a benefit you no longer have. In many Mehmi structures, we either shorten term, move part of the warranty to a separate facility, or advise paying some of it in cash.

5. How much of my lease can be soft costs before it hurts approval chances?
There’s no hard rule, but underwriters pay attention when soft costs start to dominate the deal. Many funders are comfortable with a modest share of freight, installation and training on top of the hard asset, but large proportions of renos, décor, and non-essential services can trigger higher down payments, shorter terms, or a decline. Government-backed programs like the CSBFP also cap how much of a facility can go toward related costs.(ISED Canada)

6. How does Mehmi help structure soft costs in my lease?
Mehmi starts by breaking your quote into hard vs soft costs and then:

Identifies which soft items are essential to the equipment’s value
Checks how different lessors treat soft cost percentages and term lengths
Uses tools like equipment leases, asset-based lending, working capital loans, and refinancing / sale-leaseback to put each cost in the right place
Runs side-by-side comparisons in our calculator so you can see how different structures change payment, total cost and tax timing

The goal isn’t to finance every dollar we can; it’s to finance the right dollars so your lease strengthens your cash flow instead of stretching it.

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Internal links used (list)

External citations used (list)

BDC – Equipment financing 101 and Equipment purchase financing (125% financing to cover shipping, installation and training). (BDC.ca)
Accord Financial & Canadian Equipment Financing – FAQs on including soft costs such as installation, delivery, maintenance agreements and sales tax in leases. (accordfinancial.com)
Canadian Dominion Leasing – FAQ noting that virtually any equipment can be leased, including soft costs such as freight, installation and training. (cdlcorp.ca)
CRA – Business expenses, Leasing costs, Delivery, freight and express and Expenses section of form T2125 (deductibility of lease costs and soft costs like freight). (Canada)
Joco Financial – Best equipment financing options in Canada (soft costs such as transportation, installation, maintenance and training can add 25–30% to equipment value). (jocovafinancial.com)
Truck and equipment financing resources discussing soft costs like maintenance, insurance, installation and training being part of fixed monthly lease payments. (Equipment Finance Canada)
Innovation, Science and Economic Development Canada – Canada Small Business Financing Program Guidelines (limits on related costs within equipment and leasehold financing). (ISED Canada)

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Soft costs in equipment leases (install, freight, training, warranties)