Reviewed by Merrit Capital Corporation · September 4, 2026
Equipment lease, conditional sale or cash purchase?
Equipment financing is the broad category. A lease and a conditional sales contract are two different structures within it. Merrit Capital specializes in leases and also arranges conditional sales contracts for Canadian companies. The choice should follow the equipment's expected use and the actual proposed agreement.
Equipment leasing
An equipment lease provides use of the asset in exchange for scheduled payments. Review who owns the asset during the term, the amount needed to purchase it if an option is available, notice deadlines, and any renewal or return obligations. A lease with a purchase option still needs to be compared using all payments and fees.
Conditional sales contract
A conditional sale finances a purchase with title transfer governed by the contract conditions. The business generally uses the equipment while making payments. Confirm the down payment, term, any final payment, security and early-payout calculation. This may be relevant when the plan is to keep a durable asset after the payments end.
Buying with available cash
Paying cash avoids a new financing payment, but reduces the funds available for wages, fuel, repairs and the next job. Compare the remaining cash reserve against your forecast before committing. BDC recommends assessing the full operating and cash-flow impact of buying or leasing equipment.
A practical comparison for a seasonal contractor
Suppose a landscaping and snow-removal business needs a loader it expects to use for several years. A lease quote and a conditional-sale quote may have different initial cash requirements, final payments and payout terms. Neither can be judged from the monthly payment alone. Compare each agreement through one full operating year, including the transition between summer and winter work, and ask what happens if the machine is sold earlier than planned.
If the loader is already owned and the immediate problem is payroll while invoices are outstanding, a purchase-financing comparison misses the actual need. Discuss equipment refinancing or a sale-leaseback, working capital, or factoring eligible invoices according to the available assets and receivables.
Start with the operating goal
If the business expects to keep a long-lived asset for many years, an ownership-oriented structure may feel natural. If technology changes quickly or flexibility matters more, a lease structure may deserve closer attention.
Neither option is automatically better. Compare the complete agreement against how long the equipment will remain productive.
Compare more than the monthly payment
Review term, payment frequency, fees, down payment or advance payment, residual, purchase option, early-payout provisions and total contractual payments. A lower periodic payment can be tied to a residual or different ownership outcome.
Ask who owns the equipment during the term, what happens at maturity and what events trigger extra cost.
Get tax and accounting advice
Tax and accounting treatment depends on the contract and the business. Rules and interpretations can change, and a website cannot determine the correct treatment for a specific company.
Use Merrit Capital to understand the commercial structure, then review the proposed agreement with the business’s accountant and legal advisor before signing.
Key points to carry into the transaction
- Match the term to useful life
- Compare total economics, not only payment
- Understand ownership and end-of-term rights
- Review early-payout terms
- Separate commercial advice from tax and legal advice