Dental Equipment: Lease vs. Loan
Quick answer
The three structures
Dental equipment financing usually falls into one of three structures. They all let you spread cost over time, but they differ in ownership, payment and what happens at the end.
Loan / Equipment Finance Agreement (EFA)
You borrow the purchase price and own the equipment from day one. You make fixed payments that pay down principal and interest, and at the end of the term you own it free and clear. The monthly payment is typically the highest of the three, because every payment builds equity.
$1 Buyout Lease
The lessor technically owns the equipment during the term, and you make payments that amortize most of the cost. At the end of the term, you purchase the equipment for $1. Economically it behaves like a purchase, and it often qualifies for Section 179 for that reason.
Fair Market Value (FMV) Lease
You make lower monthly payments that do not build equity — the lessor retains the equipment's economic interest. At the end of the term, you return the equipment, renew the lease, or purchase it at its then fair market value. The lower monthly payment reflects the fact that you are not paying toward ownership.
Side-by-side comparison
| Loan / EFA | $1 Buyout Lease | FMV Lease | |
|---|---|---|---|
| Who owns it during the term | You | Lessor | Lessor |
| Who owns it at the end | You | You ($1) | Lessor (buy at FMV, renew or return) |
| Typical monthly payment | Higher | Higher | Lower |
| Builds equity | — | ||
| Section 179 | May qualify — ask CPA | Often qualifies — ask CPA | May not — ask CPA |
| Typical fit | Long-life equipment | Equipment you plan to keep | Fast-cycle tech, upgrades |
Which structure fits which equipment
A useful rule of thumb — not a rule — is to match the structure to the equipment's life.
- Long-life equipment (chairs, delivery units, lights): a loan or a $1 buyout lease often fits, because you will own and use them for years and want the equity.
- Fast-cycle technology (scanners): an FMV lease can fit if you value a lower monthly payment and an easy upgrade path in a few years, because you are not paying toward ownership.
- A mix: many practices finance a chair package on a loan or $1 buyout lease and a scanner on an FMV lease, matching each structure to the asset's life.
This is not universal. The right structure depends on your cash flow, your tax position and how long you genuinely expect to keep each piece. Run the total cost — not just the monthly payment — before you decide.
The tax note
Ask your CPA — this is not tax advice
Equipment financing is arranged through our funding partner, Victory Capital Financing, subject to credit approval. Tell our Financing Team what you are buying and your timeline, and our Financing Team will connect you with VCF to compare the structures side by side.
Key takeaways
- →A loan or EFA gives you ownership up front; a $1 buyout lease hands you ownership at the end for $1.
- →An FMV lease usually has the lowest monthly payment, but you buy at market value at the end.
- →Long-life equipment (chairs) often suits a loan or $1 buyout; fast-cycle tech (scanners) can suit an FMV lease.
- →Tax treatment differs by structure — ask your CPA, then talk to Our Financing Team about financing.
Frequently asked questions
The Diversident Team
Diversident
The Diversident Team helps practices scan, equip and fund their growth.
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Book a practice financing call with our Financing Team — compare loan and lease options through Victory Capital Financing.
Diversident is not a lender. Equipment financing and working capital are arranged through our funding partner, Victory Capital Financing. Funding options vary based on business qualifications. Submitting a request does not guarantee approval.