Equipment Financing for Auto Repair Shops: Lifts, Diagnostic Tools and Paint Booths

The Equipment That Makes Your Shop

An auto repair shop is only as good as its equipment. Quality lifts, accurate diagnostic tools, and specialized equipment for services like alignment, A/C, or body work determine what repairs you can perform and how efficiently you can perform them.

Equipment financing makes it possible to access the tools you need without depleting working capital—and often with tax advantages that reduce the effective cost.

Common Equipment Financing Needs

Equipment Loans: Own What You Buy

Equipment loans work like auto loans—you borrow to purchase equipment, make monthly payments, and own the equipment when the loan is paid off. The equipment itself serves as collateral.

Terms typically range from 3-7 years depending on equipment lifespan, with rates from 6-15% based on your credit and the equipment type.

Equipment Leasing: Flexibility and Tax Benefits

Leasing provides access to equipment with lower monthly payments than loans. At lease end, you typically have options: purchase the equipment, return it, or upgrade to newer models.

Operating leases may provide tax advantages—lease payments are often fully deductible as business expenses. Consult your accountant about the best structure for your situation.

New vs. Used Equipment

Used equipment costs significantly less but carries more risk. Consider the equipment type—lifts and basic equipment hold up well used, while diagnostic tools may have outdated software.

• Lifts: Good used options available, inspect carefully
• Diagnostic equipment: Technology changes fast, new often better
• Alignment machines: Used can work but verify calibration
• Compressors: Used often fine if well-maintained
• Paint booths: Significant used savings, inspect thoroughly

Section 179 Tax Benefits

Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year of purchase rather than depreciating over time. For 2024, you can deduct up to $1,160,000 in equipment purchases.

A $50,000 alignment system purchased and financed this year could reduce your tax bill by $12,000 or more (at 24% tax rate), effectively reducing the cost of the equipment significantly.

Financing Sources

Multiple sources offer equipment financing for auto repair shops:

• Equipment manufacturers/vendors: Often competitive rates, may include training
• Banks and credit unions: Best rates for qualified borrowers
• Online equipment lenders: Faster approval, more flexible requirements
• SBA loans: Best for major purchases ($150K+), longer process
• Leasing companies: Specialize in equipment leasing options

What Lenders Evaluate

Equipment financing decisions consider your credit history (personal and business), time in business, equipment type and value, down payment (if required), and cash flow to service the debt.

The equipment's value as collateral often allows approval even when other business financing might be challenging.

Building Your Equipment Strategy

Prioritize equipment that enables new revenue (expanding services), increases efficiency (faster repairs = more capacity), improves quality (fewer comebacks, better reputation), or replaces failing equipment (avoid downtime).

Finance strategically—equipment that immediately generates returns often justifies financing costs.