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Equipment loan, lease, and fair market value comparison
The three structures look similar on a monthly basis and end in very different places. Set the quoted price, the term, and a rate inside the market range, then read the residual and the ownership outcome beside the payment.
Direct answer
Practition Finance publishes this model so a practice can compare 3 structures on one vendor quote: an equipment note, a dollar buyout lease, and a fair market value lease. It shows the monthly cost of each, the residual at the end, and where the write-off timing changes the after-tax answer.
As of October 2026
Run your numbers
Model the equipment payment
Move the amount, the term, and the rate to see what the note costs per month and across its life
The number on the vendor quote, before tax and install if those are financed separately
Move this to the range your bank or the market is quoting
Monthly payment
$3,114
60 months at 9%, principal and interest
Interest across the term
$36,825
Before any origination, packaging, or guarantee fee the structure carries
Total repaid
$186,825
Principal plus interest, if the note runs to maturity with no prepayment
Educational arithmetic on the numbers you entered. It is not a quote, a promise to lend, or an indication of offers to come, and no funder has priced this file. Program availability varies by state.
| Assumption | What the model uses | Why it is set that way |
|---|---|---|
| Quoted price | Vendor quote before tax, freight, and install | Soft costs are financeable in most structures but change the amount, so they are added deliberately rather than assumed. |
| Note structure | Level payment, ownership at the final payment | An equipment note transfers title on payoff, which is what makes the depreciation election available to the practice. |
| Dollar buyout lease | Priced as a note with a nominal purchase option | It is treated as a purchase for tax purposes, so the cost comparison against a note is close and the paperwork differs. |
| Fair market value lease | Residual set at the end of term, not at signing | The payment is lower because the residual is unpriced, and the buyout is an open number the practice cannot model precisely. |
| Depreciation | Not applied to the payment | Section 179 and bonus depreciation change the after-tax cost, and the election belongs with the practice's accountant. |
| Useful life | Compared against the recovery period, not the term | Financing a 5-year asset over 7 years leaves the practice paying for equipment it has already replaced. |
Educational arithmetic on the numbers entered. It is not a quote, a promise to lend, or // copy-allow an indication of offers to come, and program availability varies by state.
How to read what it gives you
Read the total of payments, then the residual
A fair market value lease usually shows the lowest monthly figure and the highest total once the buyout lands. Add the residual to the payment stream before comparing anything, because the ending position is part of the price.
Match the term to the recovery period
Imaging, chairs, and lasers have published recovery periods. When the term runs past the point the asset is replaced, the practice carries two payments for the same function, which is a scheduling error rather than a pricing one.
Decide who should own the residual risk
A fair market value structure keeps the upgrade path open on fast-moving technology. A note is cheaper on equipment the practice will run until it fails. The choice is about obsolescence, and the payment follows it.
Take the write-off question to the accountant
Expensing elections change the after-tax cost enough to reverse the ranking in the model. Run the pre-tax comparison here, then hand the structure and the in-service date to whoever files the return.
When the number means it is time to talk to someone
- The quote covers several assets with different useful lives on one invoice
- The vendor is offering financing and the rate is quoted as a factor rather than as interest
- The equipment is being installed as part of a build-out that also needs project financing
- The practice wants the asset in service before year end and the install date is uncertain
- A fair market value structure is being presented as a purchase
The figures behind the model
| What it measures | Market range | Confidence | How to read it |
|---|---|---|---|
| Section 179 limit | $2,560,000, phase-out from $4,090,0004 | VerifiedAugust 2026 | The expensing ceiling and the phase-out point for the current year. |
| Bonus depreciation | 100%, permanent, property acquired after January 19, 2025 (OBBBA)5 | VerifiedAugust 2026 | The share of basis available in the first year alongside the Section 179 election. |
| Equipment recovery period | 5 years, Asset Class 57.06 | VerifiedAugust 2026 | The published recovery period the term should not outrun. |
Keep the numbers
Email me this scenario
The page stays open either way. This sends a copy of the inputs you noted, so the numbers are in your inbox when you sit down with an accountant or a partner.
What owners ask about this calculator
01Which structure is cheaper?
Over the full life including the buyout, a note or a dollar buyout lease usually costs less than a fair market value lease. The fair market value structure buys flexibility on equipment that turns over quickly. Price both to the end of term, not to the monthly figure.
02Can I take Section 179 on a lease?
It depends on whether the arrangement is treated as a purchase. A dollar buyout lease commonly is, and a true fair market value lease commonly is not. The determination is a tax question with a documented answer, so it goes to the accountant with the lease in hand.
03Should I finance tax, freight, and installation?
Those costs are financeable in most structures, and rolling them in raises the amount and the payment. The decision is a cash question: if paying them out of the operating account would leave the practice short through the next collection cycle, financing them is reasonable.
04What does an application-only decision mean?
Below a threshold that varies by funder, an equipment decision is commonly made on the application, a credit pull, and bank statements, without a full financial package. Above it, tax returns and interim statements are read. The threshold sits in the figures beside this model.
05Does Practition Finance issue equipment terms?
No. Practition Finance publishes market ranges with sources and dates and refers an inquiry to funding partners. Rate, structure, residual, and every condition come from the partner that reviews the quote and communicates directly with the practice.
Sources
- 1Internal Revenue Service, Publication 946
- 2Internal Revenue Service, Section 179 deduction
- 3Equipment Leasing and Finance Association
- 4Section179.org, Ameris Bank, Rev. Proc. 2025-32
- 5Section179.org, US Bank, AE Tax Advisors
- 6Dental Practice Insider citing Rev. Proc. 87-56
When the quote is real and the structure is still open, send the request for team review