Dental Equipment Leasing — FMV, EFA, and $1-Buyout
Leasing dental equipment is rarely "better" than financing — it's a different tax and balance-sheet posture. An FMV lease keeps the equipment off your books and may suit a DSO managing covenants. A $1-buyout EFA is economically equivalent to a loan, claims Section 179, and gives you the asset at term-end. We surface the structure that fits the year you're in.
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How this product is shaped.
- FMV lease. Lowest payment, off-balance-sheet treatment, end-of-term FMV buyout or return. No Section 179 on the lessee; lessor depreciates.
- EFA / $1-buyout. Economically a loan. Section 179 available to lessee. Title transfers for $1 at term-end. Slightly higher payment than FMV.
- Capital lease. On-balance-sheet; Section 179 available. Often used when the lessor structures a 10% buyout instead of $1.
When FMV lease actually wins
FMV makes sense when the equipment depreciates fast (chairside CAD/CAM hardware on a 5-year refresh cadence), when the practice wants the lowest monthly payment to protect cash, or when off-balance-sheet treatment matters for bank covenants in a DSO setting. The trap: "fair market value" buyouts at term-end can be 10–25% of original equipment cost. If you intended to keep the equipment, you've paid the full lease and now pay again to own it.
EFA mechanics
An Equipment Finance Agreement is a security-interest loan dressed as a lease. You take title at signing in some structures, or at $1 buyout in others. You claim Section 179 in the year you place the equipment in service. Payments are level. There's no "FMV surprise" at term-end. For a dentist planning to keep the equipment its full useful life, EFA is almost always the better economic choice over FMV.
Frequently asked.
- Can I deduct lease payments?
- FMV lease: yes, payments are operating expenses (deductible). EFA: no, but you claim depreciation (Section 179 / bonus) on the equipment. Net of tax, the structures often land within a few hundred dollars over the life of the lease.
- Does a lease show on my credit?
- Both FMV and EFA report to commercial credit bureaus. Personal credit impact depends on the personal guaranty structure, common for sole-owner practices.
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