A lease lets you use commercial kitchen equipment for a fixed monthly payment without buying it outright. A leasing company purchases the range, walk-in, or dish machine and rents it to you over a term — commonly 24 to 60 months — after which you either buy it, return it, or renew. Leasing preserves cash, keeps a big purchase off your immediate books, and is often easier to qualify for than a loan because the leasing company owns the asset the whole time. The catch is that over the equipment’s life you may pay more than buying, so the structure you choose matters enormously. Model both paths first with our lease-vs-buy calculator.
Nearly every restaurant equipment lease is one of two types. A $1 buyout lease (also called a capital lease) works like buying with a loan: you make higher monthly payments and then own the equipment for a token $1 at the end. An FMV lease (fair market value, or operating lease) has lower payments, but at the end you either return the gear or buy it for its fair market value — whatever it is worth then, which is not fixed in advance. A third, less common option, the fixed-percentage buyout (e.g., 10%), splits the difference.
| $1 buyout (capital) | FMV (operating) | |
|---|---|---|
| Monthly payment | Higher | Lower |
| End of term | Own it for $1 | Return, renew, or buy at FMV |
| Ownership | Effectively yours | Lessor owns it |
| Section 179 | Usually eligible | Usually not; payments expensed |
| Best for | Long-life gear you will keep | Gear that dates fast or you may swap |
The two leases are taxed very differently, and this often decides the choice. A $1 buyout lease is treated like a purchase: you generally can claim the Section 179 deduction and depreciation, potentially writing off the equipment in year one — estimate it with the Section 179 calculator. An FMV lease is treated as a rental: you cannot take Section 179 because you do not own the asset, but you deduct the full monthly payment as an ordinary operating expense. Neither is automatically better — a $1 buyout front-loads the deduction, while an FMV lease spreads a steady write-off. Your accountant should weigh in based on your tax position.
End-of-term outcomes differ sharply. With a $1 buyout, ownership simply transfers to you for a dollar, and from then on maintenance, repair, and eventual disposal are yours — which is fine for gear you intended to keep. With an FMV lease, you face a decision: return the equipment, renew the lease, or buy it at its then-current fair market value. That FMV can surprise you — well-maintained commercial kitchen equipment sometimes appraises higher than expected, making the buyout pricier than assumed. Read the contract’s end-of-term and notice clauses carefully; missing a return-notice window can auto-renew the lease. For the ownership-versus-renting philosophy in full, see our leasing vs. buying guide.
Leasing tends to win when technology or trends move fast (POS-connected gear, specialty machines you might swap), when repair risk is high and you want the lessor to carry some of it, when you want to preserve cash for build-out or working capital, or when your credit makes a loan hard to get. Buying (with cash or a financed loan) usually wins for durable workhorses — ranges, hoods, stainless tables — that you will run for a decade, because paying a lease premium on a 15-year range rarely pencils out. Compare lifetime cost with the equipment TCO calculator, and remember a hybrid is fine: lease the fast-moving pieces, buy the rest, and stretch the budget further with used equipment. For the wider capital picture, see restaurant financing options and SBA loans for restaurants.
The monthly payment is the least important number in a lease agreement. Before you sign, find and understand these clauses, because they determine what the lease truly costs:
Add these up and the “cheaper” FMV lease can cost more than a $1 buyout. Total the real numbers with our lease-vs-buy calculator before committing.
Leasing and financing to own solve the same problem — spreading a big cost — but land in different places. A loan usually asks for a down payment and gives you ownership and equity from day one; a lease often needs little or nothing down and keeps ownership with the lessor until any buyout. Loans tend to cost less over the full life of durable gear, while leases offer lower monthly payments and easier qualification.
| Lease | Equipment loan | |
|---|---|---|
| Up-front cash | Little or none | Down payment common |
| Ownership | Lessor (until buyout) | You, from day one |
| Monthly cost | Lower | Higher |
| Lifetime cost | Often higher | Often lower |
| Qualification | More forgiving | Stricter |
If ownership and lowest lifetime cost are the goal and you can qualify, price a loan with the equipment loan calculator first.
This guide is general education, not financial, tax, or legal advice. Rates, terms, credit thresholds, and tax rules change and vary by lender, equipment type, state, and your business profile — confirm specifics with a licensed lender, leasing company, or accountant before you sign.