You can pay cash, take a loan (equipment financing), or lease. Cash is cheapest over time and gives you instant ownership, but it drains the reserve a new restaurant lives on. A loan spreads payments and you own the gear at the end. A lease keeps monthly payments lowest and preserves cash, but the total you pay is usually higher. There is no universally right answer — it depends on your cash position, credit, and how long the equipment stays useful.
Two lease structures dominate. A $1-buyout lease (also called a capital lease) is really financing in disguise: you make fixed payments, then buy the equipment for $1 and own it. Payments are higher, but the gear is yours — good for durable equipment like ranges, hoods, and walk-ins you will keep for a decade. A fair-market-value (FMV) lease has lower payments; at the end you return the equipment, renew, or buy it for whatever it is then worth. FMV suits things that age fast or that you may want to swap — POS terminals, some refrigeration, tech-heavy gear.
| Cash | Loan / financing | $1-buyout lease | FMV lease | |
|---|---|---|---|---|
| Upfront cost | Full price | Little to none | Little to none | Little to none |
| Monthly payment | None | Moderate | Higher | Lowest |
| Own at end? | Yes, day one | Yes | Yes (for $1) | Only if you buy it |
| Total cost | Lowest | Low–moderate | Moderate | Highest |
| Best for | Deep reserves | Long-life gear, good credit | Keep-forever equipment | Fast-aging or tech gear |
Leasing earns its higher cost when it solves a real problem: you are a startup with thin credit and cash you must protect, the equipment becomes obsolete quickly, or you want the option to upgrade. It is also common for large batches of gear where preserving working capital for rent, payroll, and marketing matters more than saving a few percent. Read the contract closely — watch for automatic renewals, required maintenance, insurance clauses, and stiff early-termination fees. “Lease-to-own” offers are usually $1-buyout leases; confirm which structure you are signing.
How you acquire equipment affects your taxes. Purchased and $1-buyout-leased equipment can often be written off using the Section 179 deduction and equipment financing, while FMV lease payments are typically deducted as an operating expense. The right choice depends on your tax situation, so run it by an accountant. If stretching your budget is the goal, also weigh buying used equipment outright. For the bigger funding picture, see our financing options overview and SBA loan guide, and size your total spend with the cost-to-open calculator.
Leasing companies market heavily to startups, so read past the low monthly payment. Ask for the total of all payments over the term and compare it to the cash price — that gap is your real cost of financing. A few things routinely surprise first-time owners:
How much you are financing matters too: knowing what commercial kitchen equipment typically costs helps you judge whether a lease quote is fair. When budgets are tight, mixing new and used equipment and reserving financing for the big-ticket, long-life items is often the smartest play.
This guide is general education, not financial, tax, or legal advice. Loan terms, rates, and insurance requirements change and vary by lender, state, and your business profile — confirm specifics with a licensed lender, agent, or accountant before you commit.