Construction equipment financing: rates, lenders, and lease vs buy

I spent four years on the credit side of an equipment finance shop before I started writing about it. So let me tell you the first thing we looked at on every contractor application.

Not the credit score. The machine.

Equipment financing is one of the few business loans where the thing you're buying backs the loan. That changes everything about how it gets approved and priced. It's why a six-month-old company can finance an $80,000 excavator that no bank would touch with an unsecured line.

Here's how it works, what it costs, and how to come out ahead on the lease-versus-buy question.

What is construction equipment financing?

Construction equipment financing is a loan or lease used to acquire machinery for a contracting business. The equipment serves as its own collateral.

That last part is the whole point. Because the lender can repossess and resell the machine, the loan is secured. Secured debt is cheaper and easier to get than an unsecured term loan or line.

It covers nearly anything with a serial number. Heavy iron like excavators and dozers. Compact gear like skid steers and mini-excavators. Cranes, dump trucks, concrete equipment, attachments. If it earns revenue on a jobsite, a lender will probably finance it.

How equipment financing works

You pick the machine, the lender funds most or all of it, and you repay on a fixed monthly schedule. The lender holds a lien on the equipment until you've paid it off.

Down payments range from zero to 20%, depending on your credit and the equipment. Newer machines and stronger borrowers see lower down payments.

The term matches the asset's useful life. A new machine might finance over five to seven years; an older used one over two to three.

Not sure financing is even the right tool for what you're buying? Run through this first.

New vs used equipment financing

Both finance. The difference is in the terms.

New equipment gets the longest terms and the lowest rates. The machine's value is predictable, and the lender knows what it can resell it for in three years.

Used equipment is still very financeable. Many lenders fund machines up to 10 to 15 years old, though the term shortens and the rate ticks up as the hours pile on.

Honestly, used is where smart contractors live. A two-year-old skid steer with low hours costs a fraction of new and finances on nearly the same terms. You let someone else eat the first year of depreciation. Not sure what a machine should run? See our construction equipment cost guide.

Lease vs buy: which is right for you?

This is the question I got asked most, and the honest answer is it depends on how long you'll run the machine.

Financing to own builds equity. Once it's paid off, the machine is a free asset that keeps earning. Best for core equipment you'll run for years.

Leasing keeps monthly payments lower and lets you swap into newer gear at the end of the term. Best for equipment that dates quickly, or that you only need for a stretch of work.

One myth worth killing. People assume leasing means no tax benefit, but a capital lease can still qualify for Section 179. Talk to your accountant before you decide on the tax angle alone.

Section 179 and bonus depreciation

This is where equipment financing quietly pays for itself.

Section 179 lets you deduct the full purchase price of qualifying equipment in the year you place it in service. The key detail most contractors miss is that financed equipment still qualifies.

So you can put 10% down on a machine, finance the rest, and still deduct the entire purchase price that year. The deduction can exceed what you paid in cash.

That's a real edge at year-end. I've seen contractors buy a needed machine in December specifically to capture the deduction. Our full guide to Section 179 for construction equipment walks through what qualifies — just confirm the current limits with your CPA.

Equipment financing rates and terms

Rates for qualified buyers start around 8.99% and climb with risk — older equipment, thinner credit, shorter time in business. Terms run two to seven years.

Your real payment depends on the amount, rate, and term. Estimate it here before you talk to a lender.

If you'd rather finance the machine as part of broader business funding, eBoost Partners covers equipment inside its construction business financing, matching you to several lenders on one soft-pull application.

Financing equipment with bad credit or as a startup

The collateral does the heavy lifting here, which is good news if your credit or your company is young.

With bad credit, a larger down payment offsets the risk and gets deals done into the 500s. The rate is higher, so plan to refinance once you've built a clean payment history.

Startups can finance too. Lenders weigh personal credit heavily when the business has no track record, and they're more comfortable when the equipment is clearly essential to generating revenue.

If equipment is only one piece of your funding picture, a construction business loan or a working capital line can fill the rest.

What lenders look at

Underwriters weigh four things. The equipment's value and age, your time in business, your personal and business credit, and your down payment.

The machine matters most. A late-model, in-demand piece of equipment is easy collateral, which can carry a weaker application.

Have your documents ready — equipment quote or invoice, recent bank statements, and tax returns. Clean paperwork is the difference between same-day and same-week.

Best construction equipment financing lenders

These are the lenders we rate highest for equipment, judged on rates, how readily they fund used machines, and funding speed.

How to apply for equipment financing

Get a quote on the specific machine first. The lender needs to know exactly what they're securing.

Pull your documents — the invoice, bank statements, and returns. Then compare two or three offers, because rates on the same machine vary more than you'd expect.

One last note for specialty work. If you're buying equipment for energy projects, the financing can look different — solar installs, for example, carry heavy upfront gear costs that dedicated commercial solar financing is built to handle. For broader project funding, see how commercial construction loans release money in draws.

When you're ready, pre-qualify with a soft credit pull and compare real offers — no impact to your score.