Lease Versus Buy: The Math Your Equipment Rep Won't Show You

On a $120,000 equipment package, the gap between the financing your rep leads with and the financing your bank will quote you is roughly $9,900. That is not a rounding error. It is a hygienist's benefits package, and it gets decided in a conversation that lasts about eleven minutes, in your private office, with a laminated payment sheet on the desk.

Our view: for a single-location practice, buy the equipment with a boring bank loan, and ignore Section 179 entirely while you are still deciding. That second half is where informed owners will fight us, because Section 179 is the first thing every rep and half of every CPA brings up. We think it is the wrong input at the wrong stage. It is a timing machine, not a discount, and owners who let it drive the decision end up with chairside capacity they cannot fill and a deduction they could not fully use anyway.

Your rep is not selling you a CBCT. They are selling you a payment, and the payment is the product.

The Rep's Sheet Compares Payments, Not Positions

Financing equipment is normal and not a sign of weakness. The Equipment Leasing and Finance Association reports that more than 8 in 10 U.S. companies (82%) use some form of financing when acquiring equipment, including loans, leases and lines of credit. So the question was never cash versus debt. The question is which debt, and who ends up holding the asset.

Here is the structural problem with the sheet you get handed. It shows three monthly numbers, side by side, and the lease is always the lowest. It has to be. A fair market value lease has a lower payment precisely because you are not paying for the whole machine. You are paying for the use of it, minus a residual the lessor gets to define later. The sheet compares cash flow. It does not compare where you stand in month 61.

And the residual is not a fixed thing. Equipment and supply expenses for dental practices have risen 5% since the beginning of 2025, according to ADA Health Policy Institute panel data. If replacement cost keeps drifting up at anything like that pace, the "fair market value" of your five-year-old unit is being measured against a more expensive new unit. Fair market value buyouts tend to drift up with the category, not down with your machine's age. The one number on the lease that is left blank is the one that moves against you.

A $120,000 Package, Three Ways

Take a realistic 2026 quote: a CBCT, two new chairs with delivery units, and the integration work. Call it $120,000 installed.

Option A, bank loan. A practice equipment loan at 8.5% over 60 months runs about $2,461 a month. Over the full term you pay $147,660, of which about $27,660 is interest. At month 61 you own it, free and clear.

Option B, fair market value lease. Payment of $2,250 a month for 60 months, then a buyout quoted at roughly 15% of original cost. You pay $135,000 in lease payments and then $18,000 to keep the equipment, for $153,000 all in. That is $5,340 more than the bank loan, and you do not own anything until you write the final check.

Option C, $1 buyout capital lease. Payment of $2,520 a month for 60 months, $151,200 total, and you own it at the end. That is $3,540 more than the bank loan for an identical outcome. It is the honest version of the lease, and it is still the more expensive version of the loan.

Now the tax layer, which is where the sheet usually gets its revenge. Buy under Option A and you can expense the full $120,000 under Section 179 in year one. At a combined marginal rate of 37%, that is a $44,400 reduction in year-one tax. Lease under Option B and you deduct the payments instead: $27,000 a year, worth $9,990 a year at the same rate.

Discount that five-year stream of lease deductions at 8% and it is worth about $39,877 today, so the real tax advantage of buying is roughly $4,523, not $44,400. Add it to the $5,340 of cash you did not hand over and buying wins by about $9,863.

Real, worth having, and roughly one tenth of what the Section 179 pitch implies.

Section 179 Is a Timing Machine, Not a Discount

For tax years beginning in 2026, the maximum Section 179 expense deduction is $2,560,000, phasing out dollar for dollar once qualifying property placed in service exceeds $4,090,000, per IRS Publication 946. Read that and notice what it means for you: the cap is irrelevant. No general practice is placing $4 million of equipment in service in a year. The limit that actually binds is the other one in that same publication, the one your rep never mentions, which restricts the deduction to your taxable income from the active conduct of your business, with the excess carried forward.

That is the trap. An owner who had a soft year, who took a big associate comp hit, who already expensed a build-out, may not have the taxable income to absorb a $120,000 deduction. The write-off does not vanish, it just waits. And a deduction that waits three years is worth a fraction of the number the rep wrote on the pad in December.

Our call: write-off size is the wrong metric. The right one is the after-tax cost of the asset over its useful life, which is a subtraction problem you can do on a napkin, and which almost always favors the cheapest money you can find rather than the fastest deduction you can book.

What Most Owners Get Wrong: Buying Capacity Nobody Filled

The specific mistake, and it is overwhelmingly made by owners four to nine years into ownership with one location and a growing hygiene schedule, is this: they solve the financing question carefully and never answer the production question at all.

Operatories are not free capacity. In the Practice Market Index, our dataset built from dental practice broker listings, the median practice coming to market has 5 operatories, with the middle half between 4 and 7 (n=754), and median collections per operatory of $200,000, with the middle half between $146,875 and $268,708 (n=643). Those are practices on the asking side of the market, not a cross-section of all practices, so treat them as a picture of what gets listed rather than a benchmark for you. But the spread tells you something useful: the distance between a room that carries $146,875 and a room that carries $268,708 is a scheduling and staffing problem, not an equipment problem.

Which means the honest test for new equipment is not "can I afford $2,461 a month." It is "what does this produce, net, that I am not producing now." Under Option A, that payment is $29,532 a year. The median annual wage for dentists was $176,110 in May 2025, per the Bureau of Labor Statistics, so this one piece of equipment is consuming about 17% of a median dentist's annual earnings before it generates a dollar.

To clear that with scanner-driven or imaging-driven procedures at a 55% net margin, you need roughly $53,700 a year of incremental production attributable to the machine, or about $4,475 a month. That is a specific, checkable number. It is also the number no one in the room is paid to produce.

We would not sign anything until that figure is written on the quote in your handwriting, with the case types next to it.

When We'd Actually Lease

We are not absolutists. Three situations where the lease is the right answer:

• Technology with a real obsolescence cliff. Intraoral scanners, mills, and anything whose software license is the actual product. If you genuinely expect to replace in 36 months, paying for 36 months of use is correct, and the residual risk belongs to someone else.
• A bank line you need intact. If a build-out, an acquisition, or an associate buy-in is 18 months out, keeping the equipment off your bank relationship can be worth more than $5,340. Price that optionality honestly, then decide.
• Vendor subsidized paper. Manufacturers periodically push 0% or 2.9% promotional leases to move inventory. When the lease rate is genuinely below your bank's all-in cost, take it, and read the buyout clause twice before you do.

What disqualifies a lease, every time: a blank or vaguely worded fair market value buyout, an evergreen renewal clause that auto-extends if you miss a notice window, and bundled service you cannot price separately. We would not take that deal at any payment.

Four Calls to Make Before Friday

Call your bank and get a written equipment loan quote at a specific term and rate before you talk to any rep, so you have a benchmark instead of a feeling. Make the rep put the fair market value buyout formula in writing, as a dollar figure or a fixed percentage of original cost, and watch what happens when you ask. Pull last year's taxable business income and confirm with your CPA that you could actually absorb a full Section 179 deduction this year. Then write the required monthly incremental production on the quote, with the case types, and ask your scheduler whether that volume exists in your current patient base.

Two things we are tracking. First, whether equipment cost inflation keeps running near that 5% pace, because at 8% or more the argument shifts toward locking today's price at almost any financing cost. Second, whether fair market value buyouts on 2021 leases are actually clearing near the 10% to 15% residuals that were implied at signing, or well above them. If the residuals come in low and vendor-subsidized rates undercut bank paper, we will revise this. Until then, buy the asset and rent as little as possible.

Equipment payments land in your overhead, where they quietly compound with everything else. Pull your last twelve months of collections and fixed costs and run your own numbers through our free overhead calculator to see exactly what another $29,532 a year does to your net, before you sign anything.