Leasing two soft-serve machines keeps the monthly payment lower and leaves a choice at the end of the term: hand them back, renew, or buy them at the option price. With a loan, the machines belong to the restaurant from day one. In the invented example below, owning through a loan comes out ahead only if the used machines sell for more than $6,055.56.
An invented Collierville, TN quick-service restaurant prices two soft-serve machines at $32,900 and sets a 36-month lease beside a 36-month equipment loan. In this invented case, leasing and then buying costs $37,980 against $38,635.56 for the loan, and the loan beats a lease-and-return only above $6,055.56 of invented resale value.
Soft-serve machines at a Collierville, TN quick-service restaurant: where the lease-or-own question starts
A quick-service restaurant that sells cones and shakes runs its soft-serve machines through every shift. When the old pair needs replacing, the owner has two questions: what the machines will cost each month, and whether the restaurant wants to own them once the payments stop.
In the invented case used here, the dealer prices each machine at $16,450, an invented $32,900 for the pair. A leasing company quotes $905 a month for 36 months with an invented purchase option of $5,400 at the end, and an equipment financing quote runs 36 months at a 10.75% annual rate.
Any new circuit or water line the machines need is property work outside this site, so the comparison covers the two machines alone.
Equipment leasing at the end of the term: hand the machines back, renew or buy them
A lease rents the machines for a set term. When it ends, the lease document gives the restaurant its choices: return the machines, sign a renewal, or buy them. Some leases fix the purchase price at signing, as in the invented $5,400 option here; others set it at fair market value when the term is up, which leaves the final cost open until then.
Returning the machines can carry costs of its own. The lease may require them to come back in working order, cleaned, and shipped to a place the leasing company names, so the return clause belongs in the comparison along with the monthly payment.
A loan has no end-of-term choice to make: after the last payment the machines belong to the restaurant, and any lien the funding partner recorded comes off. A business term loan works the same way when the cost is not a machine.
Questions for the restaurant’s CPA before signing a lease or a loan
The tax and book side of a lease or a loan is a question for the restaurant’s CPA, and these are worth asking before either document is signed:
- Will the lease payments be booked as an operating expense, or will the lease be recorded on the balance sheet?
- If the restaurant owns the machines through a loan, over what period can it depreciate them?
- How is the loan interest treated in the restaurant’s books?
- If the restaurant buys the machines when the lease ends, how is the option price recorded?
- Does sales tax apply to each lease payment or to the purchase price up front?
The answers depend on the restaurant’s own books, and they can tilt a comparison that looks even on payments alone. Baydale’s part is the funding conversation, not tax advice.
The lease total next to the loan total on a pair of soft-serve machines
Here are the two invented quotes over the same 36 months:
| Measure | Lease | Equipment loan |
|---|---|---|
| Monthly payment | $905 | $1,073.21 |
| Paid over 36 months | $32,580 | $38,635.56 |
| To keep the machines after month 36 | $5,400 option | Nothing more |
| Total if the restaurant keeps them | $37,980 | $38,635.56 |
In this invented case, leasing and then buying costs $655.56 less than the loan, and the lease payment is $168.21 lower each month. If the restaurant would rather hand the machines back, the lease costs $32,580, while the loan less an invented $7,000 resale nets to $31,635.56, $944.44 less than the lease.
The break-even in this invented example is a resale price of $6,055.56: above it, owning through the loan and selling costs less than leasing and returning; below it, the lease costs less. A repair bill that lands mid-term is a different kind of cost, closer to what a business line of credit carries. More cases are on the blog, and the request form reaches Baydale when the quotes are ready.
By Baydale Funding Group · Updated
