10 Reasons Why You Shouldn’t Lease Equipment

When it’s time to replace or upgrade equipment, many businesses are quickly steered toward leasing. Equipment leasing companies make it easy to spread costs over time, which can be appealing, especially when cash flow is tight.

But this article isn’t about the upsides of leasing. Equipment leases can come with real drawbacks, and in many cases, they’re not the best long-term choice. Below, we break down ten reasons why leasing new equipment may be worth reconsidering.

10 Reasons Why You Shouldn’t Lease Equipment

Before signing a lease, you should understand the risks and drawbacks of making this commitments. Here’s why you shouldn’t lease equipment.

Leases Are More Expensive

Leasing almost always costs more than buying over time. Interest, fees, and buyout costs add up. If you can afford to purchase equipment outright, it’s typically the cheaper option.

Leases Add Complexity

Leases introduce contracts, payment schedules, and compliance requirements. More moving parts mean more opportunities for errors, disputes, or unexpected costs.

Lease Accounting Rules Have Changed

Operating leases no longer stay off the balance sheet. Under updated accounting standards, leases longer than 12 months must be recorded as assets and liabilities. If tax treatment is a motivator, talk to a CPA before signing.

You May Be Responsible For Repairs

Many modern leases shift maintenance and repair costs to the lessee. In practice, you may carry the financial responsibilities of ownership without actually owning the equipment.

An Equipment Loan May Be Cheaper

If you have decent credit and can handle a down payment, equipment loans often offer better rates and clearer terms. Leases may cover soft costs, but that convenience can come at a premium.

Leases Encourage Ongoing Fixed Costs

Monthly payments can feel manageable, but they’re easy to overlook — and they stack up. Too many recurring obligations can quietly strain cash flow.

Leases Can Complicate Your Finances

Understanding deductions, depreciation, and ROI for leased equipment often requires professional help. If you don’t already work with an accountant, leasing may add unnecessary complexity.

Getting Out Early Is Difficult

Selling owned equipment is usually straightforward. Exiting a lease early often isn’t. Many leases include penalties, restrictions, or limited escape options.

Late Fees Can Escalate Quickly

Missed or delayed payments can trigger steep late fees. If your revenue fluctuates or you anticipate tight months, leasing adds risk.

Peace of Mind Matters

Owning equipment outright eliminates long-term obligations and uncertainty. While buying may hurt upfront, the financial and mental burden often ends sooner than with a lease.

The Bottom Line On Leasing Equipment

Leasing equipment can make sense in certain situations, but it’s often not the most cost-effective option. Many businesses are better served by alternatives like equipment loans, which provide access to needed equipment without the long-term expense and restrictions of a lease.

Depending on your needs and credit profile, options such as SBA loans may also be worth exploring, especially if you’re looking for longer repayment terms and lower interest rates. No matter which route you choose, take the time to compare costs, review terms carefully, and run the numbers to determine what truly makes sense for your business.