Equipment Loan Calculator
Calculate your monthly payment, total interest, AND first-year tax savings from Section 179 and bonus depreciation. See the true after-tax cost of equipment financing.
Section 179 max (2025): $1,250,000 · Bonus depreciation: 100% permanent (OBBBA 2025)
Monthly Payment
$1,385
for 5 years (60 payments)
Total Interest
$15,592
Down Payment
$7,500
First-Year Tax Savings
$16,500
True First-Year Cost
$7,618
First-year deduction: $75,000 ($75,000 Section 179 + $0 bonus depreciation)
| Month | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 1 | $1,384.87 | $906.74 | $478.13 | $66,593 |
| 2 | $1,384.87 | $913.16 | $471.70 | $65,680 |
| 3 | $1,384.87 | $919.63 | $465.23 | $64,760 |
| 4 | $1,384.87 | $926.15 | $458.72 | $63,834 |
| 5 | $1,384.87 | $932.71 | $452.16 | $62,902 |
| 6 | $1,384.87 | $939.31 | $445.55 | $61,962 |
| 7 | $1,384.87 | $945.97 | $438.90 | $61,016 |
| 8 | $1,384.87 | $952.67 | $432.20 | $60,064 |
| 9 | $1,384.87 | $959.41 | $425.45 | $59,104 |
| 10 | $1,384.87 | $966.21 | $418.66 | $58,138 |
| 11 | $1,384.87 | $973.05 | $411.81 | $57,165 |
| 12 | $1,384.87 | $979.95 | $404.92 | $56,185 |
Equipment Financing Options
Borrow to buy and own the equipment outright.
- Terms: 3-7 years
- Rates: 6-15%
- Full Section 179 available
- Equipment is your asset
Lower monthly payment, no ownership at end of term.
- Terms: 2-5 years
- Lower monthly payment
- Typically does not qualify for Sec 179
- Lease payments deductible as expense
Lease structure with $1 purchase option at the end.
- Treated like financing for tax purposes
- Section 179 generally available
- Higher monthly than FMV lease
- You own equipment at end of term
Frequently Asked Questions
How equipment loans work
An equipment loanis a secured financing product where the equipment you're purchasing serves as the collateral. Because the lender can repossess and resell the equipment if you default, equipment loans are easier to qualify for than unsecured business loans — and they typically come with lower rates. Most equipment lenders fund anywhere from $5,000 to $5 million, with terms of 3 to 7 years and rates ranging from 6% to 15% for established businesses.
Lenders typically finance 80-100% of the equipment's value, depending on credit profile and the equipment type. A down payment of 0-20% is standard. Application is usually fast — many online equipment lenders offer soft-pull prequalifications in minutes and full funding in 1-3 business days. Banks and SBA-backed equipment loans take longer (2-8 weeks) but carry better rates for borrowers who qualify.
| Feature | Equipment Loan | Equipment Lease (FMV) | Business Line of Credit |
|---|---|---|---|
| Term | 3-7 years | 2-5 years | 1-5 years revolving |
| Typical rate | 6-15% | 5-12% (effective) | 8-24% |
| Ownership | You own after payoff | Lessor owns; return or buy out | N/A |
| Down payment | 0-20% | $0 (often first/last) | None |
| Section 179 | Full deduction available | Generally not eligible | N/A (no asset) |
| Tax treatment | Depreciation + interest | Lease payments deductible | Interest deductible |
| Best for | Long-life equipment, ownership | Tech that becomes obsolete fast | Working capital, repairs |
Equipment loans almost always require a personal guarantee from the business owner, and many lenders file a UCC lien on the equipment. The interest portion of each payment is tax-deductible as a business expense in addition to the depreciation or Section 179 deduction on the equipment itself.
Section 179 and bonus depreciation in 2025–2026
Section 179lets businesses immediately deduct the full cost of qualifying equipment in the year it's placed in service, rather than spreading the deduction across the asset's useful life. For tax year 2025, the maximum Section 179 deduction is $1,250,000, with a dollar-for-dollar phase-out beginning at $3,130,000of total equipment purchases (per IRS Rev. Proc. 2024-40). The deduction cannot exceed your business's taxable income — any disallowed amount carries forward to future years.
Bonus depreciation is now 100% permanent under the OBBBA 2025 (One Big Beautiful Bill Act) for qualifying property placed in service. Unlike Section 179, bonus depreciation has no annual dollar cap and no taxable-income limitation — it can create a net operating loss. Most businesses combine both: take Section 179 first up to the cap or income limit, then apply 100% bonus depreciation to the remainder.
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| 2025 limit | $1,250,000 (phase-out starts $3.13M) | 100% (permanent under OBBBA 2025) |
| Income limit | Cannot exceed taxable income | Can create a net loss |
| Election | Per-asset, optional | Default; must elect out |
| New + used | Both eligible | Both eligible |
| Vehicle limits | Heavy SUVs capped (~$31,300 for 2025) | Subject to luxury auto limits |
Vehicle limitations deserve special attention. Passenger vehicles under 6,000 lbs GVWR are subject to luxury auto depreciation caps (a few thousand dollars per year). Heavy SUVs, trucks, and vans with GVWR between 6,000 and 14,000 lbs have a Section 179 cap of approximately $31,300 for 2025. Vehicles over 14,000 lbs GVWR (full-size work trucks, dump trucks) qualify for the full Section 179 deductionwith no special vehicle cap.
"Placed in service" means the equipment is ready and available for its intended use, not just purchased. A machine delivered December 20 but not installed until January 15 is placed in service in January — pushing the deduction to the next tax year. Plan year-end purchases carefully.
True cost of equipment financing
Sticker price isn't the real cost. Consider a $75,000 commercial machine, financed with 10% down ($7,500), a $67,500 loan at 8.5% over 5 years, for a business owner in the 22% federal tax bracket.
| Line item | Amount |
|---|---|
| Equipment cost | $75,000 |
| Down payment (10%) | $7,500 |
| Amount financed | $67,500 |
| Monthly payment (60 months @ 8.5%) | ~$1,385 |
| Total interest over loan life | ~$15,615 |
| Total payments + down | ~$90,615 |
| Year-1 Section 179 + bonus depreciation | $75,000 |
| Year-1 tax savings (22% bracket) | $16,500 |
| Year-1 cash out (down + 12 payments) | ~$24,120 |
| True year-1 cost (cash out − tax savings) | ~$7,620 |
| Net cost over loan life (after tax savings) | ~$74,115 |
Notice the leverage: a $16,500 tax refund covers most of the first year's cash outlay, effectively letting you operate the machine for ~$7,600 out of pocket in year 1. Over the full loan term, the tax savings offset most of the financing cost — your net out-of-pocket is roughly what the equipment cost in cash.
Checklist before signing:
- Negotiate the rate. Get at least 3 quotes — equipment lender, your bank, and an SBA 7(a) or 504 option. Rate differences of 2-3% are common.
- Verify Section 179 eligibility. Confirm with your CPA that the equipment qualifies, especially for vehicles, software, and improvements to existing equipment.
- Check your taxable income. Section 179 can't exceed taxable income. If you'll have a loss year anyway, lean more on bonus depreciation (which can create losses).
- Time the purchase. Year-end purchases capture the deduction sooner — but the equipment must be placed in service by December 31.
- Confirm the loan structure. Avoid prepayment penalties if you might pay off early. Watch for documentation fees, origination fees, and required insurance.
- Model the cash flow. Make sure the monthly payment fits even in your slowest revenue month — the IRS deduction won't help if you miss payments.