Start Here
Start here: the one question that sorts every structure
Who owns the equipment for tax purposes — you or the lender? That one answer decides most of what follows. If you own it (an equipment loan, a $1 buyout lease, a capital lease), the asset sits on your balance sheet, you take the Section 179 and bonus depreciation, and you carry the residual risk. If the lender owns it (a true lease, an FMV lease, most operating leases), the lender takes the depreciation, you deduct the payments, the payment is lower, and at the end you buy, renew, or return. Neither is better. One of them is right for the equipment, the tax year, and what the business needs the balance sheet to look like.
Bottom line
Ownership decides the deduction. Decide ownership first; pick the structure second.
At a Glance
The structures, side by side
| Structure | Who owns it | Deduction | End of term | Fits when |
|---|---|---|---|---|
| Equipment loan (EFA) | You | 179 + bonus on the full price | You own it outright | Long-life assets you’ll keep; you want the write-off this year |
| $1 buyout lease | You, for tax | 179 + bonus | Buy for $1 | A loan with lease paperwork; common on used and titled equipment |
| Capital (finance) lease | You, for accounting | Depreciation to you | Fixed purchase option | You want ownership treatment without a loan |
| True / FMV lease | Lender | Payments deductible; lender depreciates | Buy at fair market value, renew, or return | Fast-upgrade gear; lowest payment; keep it off the balance sheet |
| Operating lease | Lender | Payments deductible | Return or renew | Short-term use; equipment you won’t keep |
| TRAC lease | Lender, with a set residual | Payments deductible | Buy at the agreed residual; you cover any shortfall | Titled vehicles and fleets |
| Synthetic lease | Lender for accounting, you for tax | Depreciation to you | Fixed purchase | Larger companies that want off-balance-sheet treatment and the tax deduction both |
| Sale-leaseback | Lender buys what you own | Depends on the leaseback structure | Buy back, renew, or return | You own the equipment and need the cash out of it |
The Accounting Split
Operating lease vs capital lease
The difference is accounting, not equipment. A capital lease — the standards call it a finance lease now — treats the equipment as yours: it’s an asset and a liability on the balance sheet, you depreciate it, and the payment splits into principal and interest. An operating lease treats it as a rental: lower payment, the lender holds the asset and the depreciation, and you book the payment as an expense. Since the 2019 lease-accounting change, most operating leases longer than a year also show up on the balance sheet as a right-of-use asset, which narrowed the gap on paper — but the tax treatment and the end-of-term options are still different, and those are what the business feels. The test, in plain terms: if the lease runs most of the equipment’s life, or you’ll end up owning it for close to nothing, it’s a capital lease. If you’ll hand it back and the lender takes the residual risk, it’s an operating lease.
Why This Matters to Your Business
A $3M CNC line on a capital lease is $3M of first-year write-off this tax year. The same line on a true lease is a deductible payment every month and no write-off. Both can be right. The one you don’t want is the one you didn’t choose.
Where the Money Moves
True lease, FMV lease, $1 buyout: the end-of-term question
The end of the term is where the money moves. On a $1 buyout, you own the equipment for a dollar when the last payment clears — it’s a loan wearing lease paperwork, and the IRS treats it that way, so the deduction is yours. On a true lease (also called an FMV lease), the lender owns it and you have three options at the end: buy it at fair market value, renew, or return it. The payment is lower because the lender is pricing in the residual value they expect to get back. The trap is the buyout: fair market value on a five-year-old press brake can be real money, and some leases auto-renew if you miss the notice window. Read the end-of-term section of the proposal before anything else, and know the notice dates.
Fleets
TRAC: the fleet structure
A TRAC lease — terminal rental adjustment clause — exists for titled vehicles: tractors, trailers, trucks, vans. The lender owns the vehicle, you lease it, and the residual value at the end is agreed up front. If the vehicle is worth more than the residual when it’s sold, you get the difference; if it’s worth less, you cover the shortfall. It’s the structure most carriers run their fleets on because it keeps the payment low and the end-of-term option fixed. The sale-leaseback version of a TRAC — selling owned tractors to a lender and leasing them back — is how a carrier pulls equity out of a fleet without a blanket lien.
See which structure fits your equipment
One application. Competing lenders. Soft-pull pre-qual, no obligation.
Start Your Funding Request →Larger Transactions
Synthetic leases and progress funding: the $10M+ structures
A synthetic lease is built for companies big enough to care about both the balance sheet and the tax return: it’s an operating lease for accounting and a loan for tax. You keep the depreciation; the lender holds the asset off your books. It takes a lender with its own capital and a real documentation team, so it shows up on larger transactions, not on a dealer’s finance desk. Progress funding solves a different problem: equipment with a long build time — a CNC line, a production cell, a crane — gets paid to the manufacturer in milestones over months, before anything ships. Progress funding advances those milestone payments and rolls them into the lease or loan when the equipment is placed in service, so you aren’t carrying deposits on a line of credit for eight months.
Already Own It
Sale-leaseback: when you already own it
You sell equipment you own to a lender and lease it back. Nothing moves; the cash lands. The leaseback can be any of the structures above, which is why the ownership question comes back: a sale-leaseback on a capital-lease structure keeps the depreciation with you; on a true-lease structure it goes to the lender. The full page is here: equipment sale-leaseback. The short version: it’s the structure for an operator who paid cash for the iron and now needs the capital back without a blanket lien or a bank covenant package.
From the Desk
Bobby’s Take
Bobby’s Take
“Operators ask me which structure is best. The question I ask back is what the balance sheet needs to look like in December and what the tax return needs to look like in April. A controller who wants the payment off the books wants a true lease. An owner with a profitable year who wants the write-off wants a $1 buyout or a loan. A carrier running forty tractors wants a TRAC. Same equipment, three right answers. The wrong answer is signing the proposal without knowing which one it is.”
— Bobby Friel, Basecamp Funding · Founder
On Top of the Structure
Payment structures that ride on top
Any of the structures above can carry a payment shape: step payments that start low and rise as the equipment ramps revenue; deferred first payments for equipment that takes months to install; seasonal payments that drop in the off months for ag, construction, and tourism; balloon structures that keep the monthly low with a larger final payment. These are negotiated in the proposal, and they’re where an equipment lender earns its keep over a bank.
Run the write-off on a $1 buyout or loan in the Section 179 calculator →
Before You Sign
The three questions to ask before you sign
Who owns this for tax purposes, and does that match what my CPA wants this year?
Why it matters: The deduction follows ownership. A $1 buyout or capital lease puts the write-off on your return; a true or FMV lease puts it on the lender’s.
What to ask
Have the proposal name the tax owner in plain terms, and send it to your CPA before it goes back signed.
What exactly happens at the end of the term — the dollar amount, the notice window, and whether it auto-renews?
Why it matters: The end of the term is where the money moves. A fair-market-value buyout can be real money, and a missed notice window can renew the lease without you deciding to.
What to ask
Get the purchase amount or method, the notice dates, and the renewal terms in writing before you sign.
What’s pledged — the equipment only, or anything else?
Why it matters: An equipment structure should be secured by the equipment. A blanket lien or a broad guarantee ties up the rest of the business for the life of the lease.
What to ask
Confirm the collateral section names the equipment and nothing beyond it, unless you’ve agreed to more.
Working with Basecamp
The proposal names the structure. Before it goes back signed, the desk walks through the ownership, the end-of-term, and the collateral with you — and your CPA reads it. Nothing signs that you can’t explain in two sentences.
Continue Learning
Where to go next, depending on whether you’re buying equipment or pulling cash out of equipment you own.
Equipment Sale-Leaseback
Already own the equipment? Sell it to a lender, lease it back, and pull the capital out without a blanket lien.
Equipment Financing
Loans and leases secured by the equipment itself, structured to the asset and its useful life.
Equipment Financing vs Leasing
A worked comparison on a $200K CNC machine: the payment, the write-off, and what you own at the end.
Put the Guide Into Practice
Section 179 Calculator
The first-year write-off next to the payment, at your bracket.
Equipment Financing Calculator
Monthly payment, total interest, and the write-off on any equipment purchase.
All calculators are free, no signup required.
