How equipment loan payments are calculated
An equipment loan is repaid in equal installments. Each period the lender charges interest on the balance you still owe, at one twelfth of the annual rate for monthly payments, and the payment is set so the balance reaches zero, or reaches a balloon payment if you have chosen one, at the end of the term. As the balance falls, more of each payment goes to principal and less to interest.
Terms of 24 to 84 months are common for equipment, often matched to its useful life. The calculator takes a term of up to ten years, with monthly or quarterly payments, and lets you choose whether each payment falls at the end of the period (arrears, usual for a loan) or at the start (in advance, usual for a lease).
Worked example: $75,000 of equipment over five years
Buy $75,000 of equipment with a 10% down payment of $7,500, 7% sales tax of $5,250 paid in cash, an 8.5% interest rate and a five-year loan, paid monthly. You need $12,750 at the start and you finance $67,500. The payment is $1,384.87 for 60 months, and the total interest is $15,591.95.
You pay $95,841.95 in total, including the sales tax. The cost of the financing is 20.79% of the price, and the APR with fees included is 8.50%. On a US page the APR is the nominal annualised rate, which is how lenders usually quote it. After 12 months you still owe $56,185.04, having paid $5,303.43 of interest in the first year.
Sales tax, down payment and fees
On a loan, sales tax is charged on the full price. You can pay it in cash or add it to the amount financed, and many lenders also let you finance a documentation fee. A $300,000 machine with $60,000 down, 6% sales tax and a $500 fee both added to the loan means you finance $258,500 over 84 months at 7.4%, and the payment is $3,952.20.
On a lease, tax is usually charged on each payment, and the rules vary by state. Add any purchase option fee, which is charged when you take ownership. If a lease ends with a $1 buyout and you keep the equipment, treat it as a loan and choose Equipment loan.
Balloon payments
A balloon is a final lump sum that lowers the regular payments. On $60,000 of equipment with a 10% down payment, 8.25% sales tax added to the loan, a 9.75% interest rate, three years and an $8,000 balloon, you finance $58,950 and the payment is $1,703.04. You then pay the $8,000 balloon with the last payment, for $75,309.42 in total and $10,359.42 of interest.
Leasing equipment
A lease lowers the payments because you pay for the value you use, not the whole price. The residual value left at the end is not paid unless you buy the equipment. Take $95,000 of equipment on a four-year lease at 8.2% with a 10% down payment, payments in advance and a $250 documentation fee. With no residual the payment before tax is $2,081.12. A 15% residual of $14,250 cuts it to $1,830.98, or $1,959.15 with 7% sales tax.
If you return the equipment you pay $104,454.17 in total, including the sales tax and fee. If you buy it, choose the lease with a purchase at the end: the residual and any option fee are added to the last payment.
Tax savings: Section 179 and bonus depreciation
Equipment you buy with a loan is generally yours for tax purposes even while you owe money on it, so you may be able to deduct its cost in the first year. Section 179 allows a deduction of up to $2,560,000 for 2026, reduced once the equipment you place in service in the year costs more than $4,090,000. Bonus depreciation is 100% for qualified property acquired after January 19, 2025. The federal corporate tax rate is 21%.
The estimate uses your tax rate and the share of the cost deducted in year one. At 21% with 100% deducted, the $75,000 example gives $17,966.22 of tax savings in year one, made up of $16,852.50 on the equipment cost (including sales tax) and the savings on the first year of interest. The savings on interest over the whole loan are $3,274.31, and the net cost after tax savings is $75,715.14.
On a true lease the payments are generally deducted as you make them, not the equipment cost, so the year-one savings are lower. State rules differ, and limits depend on your income and equipment use. Confirm the treatment with your tax adviser.
Finding the interest rate from a quoted payment
Equipment is often quoted as a monthly payment with no rate. Choose The regular payment (find the rate) under what you know, enter the price, down payment, balloon, term and the payment, and the calculator finds the nominal yearly rate that gives it, then shows the APR with fees. Take $75,000 of equipment with 10% down and a five-year term, quoted at $1,384.87 a month. The implied interest rate is 8.50%, the amount financed is $67,500.00 (down payment taken off, sales tax paid in cash), the interest is $15,591.95 and the APR with fees is 8.50%.
The payment must be more than the amount financed spread over the term, or the rate would be negative, and it cannot be more than a 100% yearly rate would need.
What this estimate leaves out
This is a planning estimate for a fixed-rate agreement. It does not check eligibility, collateral or a personal guarantee, and it does not model a variable rate, a rate that steps up, a seasonal payment schedule, a fair market value buyout or a lender that compounds interest daily. The tax savings are a simple estimate, not tax advice, and they ignore the timing of payments, the resale value of the equipment and state tax. The figures in your agreement are the ones that count.
For UK asset finance, use the asset finance calculator .
To compare with a business term loan, use the business loan calculator .
Use the right country page
This page stays in US dollars and uses US terms: equipment loan, down payment, sales tax, purchase option fee, APR as the nominal annualised rate and the Section 179 deduction. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the asset finance calculator, which uses hire purchase, VAT, an option to purchase fee and UK capital allowances. The inputs reset and amounts are not converted.
Inputs for the equipment loan calculator
Equipment price
The price of the equipment before sales tax.
Sales tax
The sales tax rate where the equipment is delivered. Enter zero if none or exempt.
Type of financing
An equipment loan, or a lease that you return or buy at the end.
Down payment
Paid at the start, as a percentage of the price or as an amount. On a lease it is an initial payment.
Balloon or residual value
A final lump sum that lowers the regular payments, as a percentage of the price or as an amount.
Interest rate
The yearly nominal rate on the financing, before fees. The APR with fees is shown in the results.
Regular payment you were quoted
Used when you choose The regular payment. The calculator finds the nominal yearly rate that gives it.
Term and payments
The term in years or months, with monthly or quarterly payments at the start or end of each period.
Sales tax on a loan
Paid in cash at the start or added to the amount financed. On a lease, tax is charged on each payment.
Documentation and purchase option fees
A documentation fee paid in cash or added to the financing, and a purchase option fee charged with the final payment.
Tax savings
Your income tax rate and the share of the cost deducted in year one. Enter zero for the tax rate to leave the estimate out.
CALCULATOR QUESTIONS
US equipment loan calculator questions
How do you calculate an equipment loan payment?
Subtract the down payment, add any sales tax you finance, then charge interest each period and set a level payment so the balance reaches zero. $67,500 at 8.5% over five years is $1,384.87 a month.
How do I find the interest rate on an equipment loan?
Choose The regular payment (find the rate), then enter the price, down payment, balloon, term and the payment you were quoted. $75,000 of equipment with 10% down over five years at $1,384.87 a month implies 8.50%.
Is sales tax charged on equipment financing?
Usually yes. On a loan it is charged on the full price, and you can pay it in cash or finance it. On a lease it is usually charged on each payment, and state rules differ.
What is the difference between the interest rate and the APR?
The APR adds fees to the interest rate. A documentation fee added to the loan lifts the rate slightly, so compare offers on APR.
What does a balloon payment do?
It lowers the regular payments by leaving a lump sum for the end. You owe more for longer, so the total interest rises.
Can I deduct equipment financed with a loan?
Often yes. Section 179 allows a deduction of up to $2,560,000 for 2026, and bonus depreciation is 100% for qualified property acquired after January 19, 2025. Confirm your own situation with a tax adviser.
Is a $1 buyout lease a loan?
Treat it like one if you keep the equipment: choose Equipment loan. A true lease, where you return the equipment or buy it at its market value, is different.
What happens when I change country?
The United Kingdom option opens the separate asset finance calculator, in pounds, with hire purchase and VAT. Your inputs are reset rather than converted.