In This Article
What Is a Sale-Leaseback?
A sale-leaseback is a transaction where you sell equipment you already own to a financing company and immediately lease it back. You get a lump sum of cash based on the equipment's current value, and you continue using the equipment as if nothing changed — except now you're making lease payments instead of owning it outright. At the end of the lease, you typically have the option to repurchase the equipment for a nominal fee ($1 buyout) or fair market value.
How the Valuation Works
The financing company appraises your equipment based on age, condition, hours/mileage, market demand, and original purchase price. You can typically expect 50-80% of current fair market value as the lump sum. For example, a 2-year-old Peterbilt 579 purchased for $180,000 with 200,000 miles might appraise at $120,000, and you'd receive $72,000-$96,000 through a sale-leaseback. The lease term is usually 2-5 years with monthly payments.
Real-World Example
A fleet owner has 5 trucks worth a combined $500,000 that are fully paid off. Business is growing but they need $300,000 for a new contract that requires additional trailers and drivers. Through a sale-leaseback, they receive $375,000 (75% of value) and lease the trucks back at $7,200/month for 48 months ($1 buyout). They use the capital to buy trailers and hire drivers, generating $40,000/month in new revenue. The lease payment is easily covered, and they'll own the trucks again in 4 years.
Sale-Leaseback vs. Equipment Refinancing
Both free up cash from existing equipment, but they work differently. Equipment refinancing is a loan against your equipment — you retain ownership and make loan payments. A sale-leaseback transfers ownership to the leasing company. Refinancing typically offers lower rates (since you're taking a loan, not selling), but sale-leasebacks can sometimes provide more cash because the "sale" component allows higher advance rates. Tax treatment also differs: refinancing interest is deductible, while lease payments may be fully deductible as operating expenses.
Pros & Cons
Pros
- Unlock cash from assets you already own
- Continue using equipment with no disruption
- Lease payments may be fully tax-deductible
- No need for additional collateral
- Can free up more capital than refinancing
Cons
- You give up ownership (temporarily or permanently)
- Total cost over lease term exceeds equipment value
- Equipment must be in good condition and valuable
- Monthly lease payments reduce cash flow
- Less common for older or high-mileage equipment
Key Terms to Know
Best For
- Fleet owners needing growth capital
- Businesses with paid-off equipment and cash flow needs
- Companies wanting to free up working capital without new debt
- Operators who need cash but can't qualify for traditional loans