Leases trade a lower start for no ownership; a $1 buyout lease ends in ownership at a higher payment; an FMV lease ends with a return or a purchase at market value; an EFA or loan means owning from day one. Compare the totals.
At a glance
- What it pays for
imaging, kitchen units, scanners, site machines
- Forms
loan, EFA, $1 buyout lease, FMV lease
- Outside this site
wiring, plumbing and other property work
How do equipment leases work? Reach-in refrigerators at a Hamilton County, IN quick-service restaurant
An equipment lease lets a business use a machine it does not own. The leasing company buys the equipment, the business pays a fixed amount each month for a set term, and at the end it returns the equipment, renews the lease or buys it, as the contract allows.
Illustration only, invented figures: a Hamilton County, IN quick-service restaurant leases three reach-in refrigerators priced at $11,940 together. The lease runs 48 months at $318.25 a month, so the payments total $15,276.00, which is $3,336.00 more than the purchase price. That difference is the price of not paying for the units on day one, and it buys nothing at the end unless the contract includes a purchase option.
Reach-in units plug into an outlet, which is why they lease cleanly; a walk-in that needs new wiring is a different case, and any electrical work is property work outside this site. Units like these stock the kitchens of limited-service restaurants; for 2023, ZIP Code Business Patterns placed 70 such restaurants in ZIP 46032 (NAICS 722513).
Equipment finance agreement vs a loan for a trencher at a Carmel, IN home builder
An equipment finance agreement, often shortened to EFA, is a financing contract for named equipment: the business owns the machine from the start, the machine secures the debt, and the payments run for a fixed term. An equipment loan works much the same way, but a loan agreement may give the lender a claim on more than the one machine, such as a lien on all business assets. Reading which property each document names is the main difference to check.
Illustration only, invented figures: a Carmel, IN home builder buys a trencher for $38,450, puts $3,845 down and finances $34,605 over 60 months at 9.45%. Each month the builder sends $725.92; across five years that is $43,555.20, so the trencher carries $8,950.20 of interest. The calculator on this page takes those same four inputs: price, down payment, rate and term.
Builders here are mostly small firms: of the 231 residential building construction establishments with a payroll in Hamilton County, IN in 2023, 181 had fewer than five employees (County Business Patterns, NAICS 2361). Owner-run builders appear in a separate count, with 668 residential building firms without paid employees in the 2024 Nonemployer Statistics.
Planning an intraoral scanner in Hamilton County, IN? How does a $1 buyout lease work?
A $1 buyout lease is a lease in name and close to a purchase in practice: the business makes every payment for the term, then buys the equipment for one dollar. Because the leasing company gets its full price back through the payments, they run higher than on a lease that ends with a return.
Illustration only, invented figures: a Hamilton County, IN dental office picks an intraoral scanner priced at $29,870. On a $1 buyout lease of 48 months at $812.60 a month, the office pays $39,005.80 including the dollar. Financed instead with a 48-month loan at 11.2%, the payment is $774.91 and the total $37,195.68, $1,810.12 less than the lease. The office owns the scanner either way at the end; the lease may still suit it if its accountant prefers lease payments to a loan on the books, a question for that accountant.
What is a fair market value lease, and does it suit a Carmel, IN physician office lab analyzer?
A fair market value lease, or FMV lease, ends with a choice: return the equipment, renew, or buy it at what it is worth on that day. The payments are lower than on a $1 buyout lease because the leasing company expects to get part of its money back from the equipment itself. It fits equipment that loses its usefulness within a few years, where owning it at the end is not the goal.
Illustration only, invented figures: a Carmel, IN physician office leases a blood chemistry analyzer worth $18,300 for 36 months at $472.15. The payments total $16,997.40. If the office then buys the analyzer at an assessed value of $2,750, it has paid $19,747.40 in all; if it returns it and leases a newer model, it has paid $16,997.40 for three years of use.
ZIP Code Business Patterns put 137 offices of physicians inside ZIP 46032 for 2023 (NAICS 6211), the kind of office that buys or leases an in-house analyzer. For an office that expects to replace its analyzer when its test menu changes, the return option is the point of the lease.
New or refurbished: financing a soft-serve machine for a Carmel, IN quick-service restaurant
Used and refurbished equipment can be financed, though a partner may set a shorter term, ask for the seller's service records or count the machine for less as collateral. The comparison is not only the price tag but the payment and how long the machine will last.
| New machine | Refurbished machine | |
|---|---|---|
| Price | $16,900 | $9,650 |
| Term and rate | 48 months at 10.9% | 36 months at 12.15% |
| Monthly payment | $435.97 | $321.21 |
| Total of payments | $20,926.56 | $11,563.56 |
| Interest | $4,026.56 | $1,913.56 |
In this invented case the refurbished machine costs $9,363.00 less in total, its payment is $114.76 lower a month and its term ends a year sooner. What a quick-service restaurant gives up is working life: a refurbished machine has fewer years left, which matters if it may need replacing within five years. A soft-serve machine may need its own electrical circuit; that work is property work outside this site.
Equipment lists priced item by item appear in the blog articles on a fifth dental operatory, one physician exam room, three rented salon suites, eight Pilates reformers and a second chiropractic clinic.
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