How do I calculate an equipment loan payment?

An equipment loan payment is usually calculated using the standard amortizing loan formula. You enter the equipment cost, down payment, interest rate and term. The calculator converts the annual rate to a monthly rate and applies the PMT formula to find a fixed monthly payment that repays principal and interest over the term.

Is it better to lease or finance equipment?

Leasing typically offers lower monthly payments and may preserve cash, but you do not build ownership in the asset. Financing with an equipment loan usually has higher payments but you own the equipment at the end. The best option depends on your cash flow, tax situation, how long you will use the equipment, and whether you need the latest technology.

Can I deduct equipment loan payments on my taxes?

In most jurisdictions, you cannot deduct the full loan payment. Instead, you may deduct interest expense and depreciation (or use accelerated deductions such as Section 179 in the U.S.) if the equipment is used for business. The calculator lets you enter a tax rate to estimate the after-tax cost of financing, but you should confirm details with a tax professional.

What credit score do I need for an equipment loan?

Lenders often prefer credit scores of 650 or higher for the best rates, but many equipment finance companies will work with lower scores if the business has strong cash flow, collateral and time in business. The calculator does not check credit; it only shows how different interest rates would affect your payment and total cost.

How much equipment can my business afford?

A common rule of thumb is to keep total equipment payments below 10–15% of your average monthly business revenue. The affordability tab in this calculator lets you enter a target monthly budget and interest rate to estimate the maximum equipment price you can afford, given a down payment and term.

Equipment Loan Calculator

Estimate monthly payments, total interest, tax savings and see a full amortization schedule for your business equipment financing. Compare loan vs. lease and check affordability in one place.

Equipment cost

Down payment

20%

Term (years)

Interest rate (APR)

Residual / balloon at end (optional)

Set a residual if your lender structures the loan like a lease with a buyout at the end.

Business tax rate (for interest deduction)

Used to estimate after-tax cost of interest. Actual deductions depend on your local tax rules.

Include sales tax in amount financed

Loan summary

Amount financed: $60,000
Monthly payment: $1,200.00
Number of payments: 60
Total of payments: $72,000
Total interest: $12,000
Estimated tax savings on interest: $3,000
After-tax cost of financing: $69,000

Principal vs. interest

Principal Interest

Amortization schedule

#	Payment	Principal	Interest	Balance

How this equipment loan calculator works

This tool is designed for real-world business equipment financing: tractors, trucks, construction machinery, manufacturing lines, medical devices, IT hardware and more. It supports:

Standard fully amortizing loans
Loans with a residual / balloon payment (lease-style structures)
Sales tax rolled into the loan
Estimated tax savings from interest or lease payments
Affordability based on a target monthly budget
Side-by-side loan vs. lease comparison

Payment formula

The calculator uses the standard amortizing loan formula. Let:

$P$ = amount financed (equipment cost + sales tax − down payment)
$r$ = monthly interest rate = APR / 12 / 100
$n$ = number of monthly payments (years × 12)
$B$ = residual / balloon amount at the end (optional)

If there is no residual ($B = 0$), the monthly payment is:

\[ \text{Payment} = P \cdot \frac{r(1+r)^n}{(1+r)^n - 1} \]

With a residual / balloon, the payment is:

\[ \text{Payment} = P \cdot \frac{r(1+r)^n}{(1+r)^n - 1} - B \cdot \frac{r}{(1+r)^n - 1} \]

Each row in the amortization schedule shows how much of each payment goes to interest vs. principal, and the remaining balance after the payment.

Estimating tax savings

For loans, the calculator multiplies total interest by your tax rate to estimate potential tax savings:

\[ \text{Tax savings (loan)} \approx \text{Total interest} \times \text{Tax rate} \]

For leases, it assumes lease payments are fully deductible operating expenses:

\[ \text{Tax savings (lease)} \approx (\text{Total lease payments}) \times \text{Tax rate} \]

This is a simplification. In practice, you may use accelerated depreciation (e.g., Section 179 or bonus depreciation in the U.S.), which can change the timing and amount of deductions.

How to use the equipment loan calculator

1. Estimate payments & schedule

Enter the equipment cost (invoice price before tax).
Add your planned down payment or adjust the percentage slider.
Choose the term in years and interest rate (APR).
Optionally set a residual / balloon if your lender offers one.
Toggle “Include sales tax” if tax will be financed, and enter the rate.
Enter your approximate business tax rate to see after-tax cost.
Click Calculate to update the summary and amortization table.

2. Check affordability

Switch to the Affordability tab and:

Enter your target monthly budget for this equipment.
Set the term, interest rate, and down payment %.
The tool will estimate the maximum equipment price that fits your budget.

3. Compare loan vs. lease

In the Loan vs. Lease tab you can:

Enter loan details on the left (price, down payment, rate, term).
Enter lease details on the right (monthly payment, term, buyout).
Set your tax rate to see estimated after-tax cost of each option.

This helps you see whether lower lease payments offset the lack of ownership compared with a loan.

Tips for choosing an equipment loan

Match term to useful life: Avoid financing equipment longer than you expect to use it.
Consider a residual: A balloon payment can reduce monthly payments but increases risk at the end of the term.
Watch total interest: Longer terms lower payments but increase total interest cost.
Check fees: Origination fees, documentation fees and prepayment penalties can change the real cost.
Talk to your accountant: Tax treatment of loans vs. leases can significantly affect your after-tax cost.

Equipment Loan Calculator

Loan summary

Principal vs. interest

Amortization schedule

What you can afford

Loan option

Lease option

Loan – cost overview

Lease – cost overview