How Does Equipment Leasing Work in Canada?

Equipment leasing has become a strategic choice for Canadian businesses of all sizes. For instance, the heavy equipment rental industry in Canada, covering construction, mining, agriculture, and transportation sectors, reached over $9 billion in revenue by 2023.

In this guide, we explain how equipment leasing works in Canada, from how to handle the process to the types of leases available, so you can decide whether it’s the right solution for your business!

What is Equipment Leasing?

Equipment leasing is a financing method that lets business owners use essential or high-cost equipment without paying the full purchase price upfront. Instead, they sign a lease agreement with a leasing company and make regular payments over a set period.

At SPAR Leasing, we have streamlined this process. With over three decades of experience and deep industry connections, we offer tailored leasing solutions for various types of equipment.

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Why Should I Lease Equipment?

Equipment leasing provides a solution that balances operational needs with financial practicality. It gives business owners access to advanced equipment without draining capital or impacting their ability to qualify for other lines of credit.

Leasing offers several benefits for businesses:

• It reduces upfront costs, easing the financial burden and preserving cash for other priorities.
• It improves cash flow by spreading the expense of equipment over time through predictable monthly payments.
• It keeps debt levels low by avoiding large liabilities on the balance sheet.
• It provides flexible financing options to businesses that may not qualify for a traditional loan due to a limited credit history or lower business credit score.

For many businesses, leasing equipment is a more appealing option than purchasing, particularly when the equipment is costly or likely to become obsolete. Additionally, leasing may offer tax advantages, as lease payments can sometimes be deducted on a company’s tax return, depending on the lease structure and local tax regulations.

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How Equipment Leasing Works in Canada

1. Choose the Equipment

The first step is identifying the essential equipment your business needs to stay competitive. This could include:

• Office equipment (printers, IT hardware)
• Medical equipment
• Restaurant and hospitality equipment
• Heavy machinery and other industrial equipment
• Production equipment used in manufacturing or construction
• Retirement home equipment and furniture
• Etc.

These pieces of equipment can be expensive if purchased outright, which is why leasing becomes an attractive option for businesses trying to avoid large expenses.

2. Select a Leasing Provider

Once you know what you need, the next step is to choose a leasing provider. In Canada, business equipment leasing is offered by a variety of sources:

• Independent leasing companies
• Banks and other financial institutions
• Equipment dealers or equipment brokers
• Lease brokers who compare leasing options on your behalf

Each provider offers different lease terms, monthly lease payments, and credit approval requirements. Working with experienced equipment finance providers like SPAR Leasing ensures you’re guided through the credit application process with minimal additional costs.

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3. Negotiate Lease Terms

Once a provider is selected, you’ll enter into a lease contract that defines:

• The lease period (typically from 12 to 84 months)
• Payment frequency (monthly, quarterly, or annual installments over time)
• Any down payment or origination fees
• Insurance obligations and maintenance responsibilities
• The type of lease (e.g., financial leases, operating leases, or lease-to-own agreements)

End-of-lease decisions are a key part of negotiation. You may have options to:

• Return the equipment
• Renew under new leasing terms
• Exercise a purchase option for a nominal price, completing a lease-to-own setup

4. Use the Equipment

During the lease term, the lessee uses the equipment as part of daily operations. Responsibilities include:

• Keeping the equipment in good condition
• Maintaining proof of insurance
• Ensuring payments are made on time to avoid penalties or repossession risks

Monthly payments are often treated as an operating expense, helping businesses manage monthly expenses and offering cash flow benefits.

5. End of Lease

At the end of the lease period, several outcomes are possible, depending on the original equipment leasing agreement:

• Return the equipment and walk away
• Renew the lease under new lease rates
• Buy the equipment at fair market value or a pre-agreed price

This flexibility makes leasing a compelling option for those looking to adapt to changing market conditions without committing to full ownership costs upfront.

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What Are the Different Types of Equipment Leases?

Choosing the right lease depends on your business needs, equipment usage, and long-term financial decisions. Below are the most common types of equipment lease agreements, each with its own lease structure, benefits, and potential business expenses.

Operating Lease (Fair Market Value Lease)

An operating lease is a short-to-medium term rental agreement where the equipment is returned to the equipment leasing company at the end of the lease period. The lessee uses the equipment without assuming ownership or long-term responsibility. This type of lease is popular for costly equipment that becomes obsolete quickly, such as office furniture, IT systems, or industrial machinery.

Capital Lease (Finance Lease)

A capital lease is closer to a loan for equipment financing. While the lessor retains legal ownership, the lessee assumes many of the responsibilities of ownership, such as liability insurance, maintenance costs, and reporting on financial statements.

Capital leases are ideal for acquiring high-value business equipment with long usable lives. They’re best suited to businesses with stable business financials and an eye on ownership benefits.

$1 Buyout Lease

This lease structure, a subtype of a capital lease, allows businesses to purchase the equipment for just $1 at the end of the term. It functions as a simple lease-to-own agreement, ideal for companies that are already committed to long-term use of the asset.

A $1 buyout lease is particularly well-suited for businesses with a clear understanding of their equipment needs, seeking predictable, loan-like payment terms that align with their cash flow and operational requirements.

Lease-to-Own

A lease-to-own setup allows monthly lease payments to gradually contribute toward the eventual purchase option. This option balances short-term affordability with the long-term value of ownership. It’s also useful in sale-leaseback options, where a company sells equipment to a lender and leases it back, freeing up capital while retaining access.

Seasonal or Short-Term Leases

These leases are structured to match fluctuating business cycles. They’re often used in industries where business equipment is only needed for part of the year. Seasonal leases can include pause periods or adjusted monthly rent charges depending on usage, which can be beneficial for managing current debt obligations and avoiding extraneous costs.

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How Do I Know If I Qualify for Equipment Leasing?

Qualifying for equipment leasing typically depends on a few key financial and business factors. Most leasing companies will evaluate:

• Your business credit score and credit history
• Time in business (many lenders prefer businesses operating for at least 6–12 months)
• Business financials, including revenue, cash flow, and debt obligations
• A completed credit application and possibly recent financial statements
• Your ability to provide proof of insurance and cover any down payment or origination fees if required

If your business is newer or has limited credit, don’t worry—SPAR Leasing offers flexible leasing options and works with a wide range of clients, including those with non-traditional credit backgrounds. A quick consultation or pre-approval process can help determine your eligibility with minimal paperwork.

Fuel your growth with flexible equipment leasing

What Types of Equipment Can You Lease?

At SPAR Leasing, we offer tailored equipment financing solutions for a wide range of industries and business needs. Whether you’re looking to lease new or used assets, our flexible programs make it easier to access the tools you need.

Here’s a look at the types of equipment businesses commonly lease:

• Office Equipment: Computers, printers, IT infrastructure, and telecommunications systems
• Medical Equipment: Diagnostic machines, imaging systems, and specialized clinic equipment
• Industrial Machinery: Manufacturing tools, automation systems, and production equipment for industrial operations
• Heavy Equipment: Construction vehicles, earthmoving machines, and related heavy machinery for building, mining, or infrastructure projects
• Retail and Hospitality Equipment: Point-of-sale systems, commercial kitchen gear, and display equipment
• Agricultural Equipment: Tractors, irrigation systems, and seasonal-use machinery

By working with SPAR, businesses gain access to equipment leasing options that support growth, manage business expenses, and preserve cash flow. Our programs are ideal for companies looking for scalable, flexible lease terms that can adapt to their operational needs and industry cycles.

Get the equipment you need without the upfront cost

SPAR Leasing: Empowering Canadian Businesses Through Flexible Equipment Leasing

At SPAR Leasing, we provide flexible, fast, and cost-effective equipment financing solutions for Canadian businesses. With over 35 years of experience, we’ve built strong relationships across different industries, helping companies access the machinery, technology, and tools they need without the burden of large upfront costs.

Whether you’re looking to lease office equipment, medical devices, heavy machinery, or production equipment, we’re here to simplify the leasing process with personalized service, quick approvals, and terms that fit your business.

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