Equipment Dealer Financing in Canada: How Dealer Programs Work and What to Compare
How dealer financing programs work for equipment in Canada, what to compare in the fine print, and when an outside offer saves money.
Dealer financing is a loan or lease arranged through the dealer or manufacturer selling you the equipment. You pick the machine, the salesperson walks you to the finance desk, and you leave with both the equipment and the payment plan. About 35% of all spending on equipment and commercial vehicles in Canada goes through some form of financing, according to the CFLA’s 2026 Annual Report, and a large share of that starts at the dealer counter. Dealer programs can be competitive on new equipment, but the terms are not always the best available, especially on used equipment or when the dealer is working with a single finance company.
Key takeaways
- Manufacturer-backed (captive) finance programs can offer subsidized rates or cash-back deals on new equipment, but those promotions rarely extend to used equipment
- Dealer financing is fast and convenient, though the terms may be less flexible than what a bank or broker offers on payment deferrals, advance ratios, and term length
- Used equipment financed through a dealer typically carries higher rates and a lower advance percentage than the same dealer offers on new units
- Always compare the dealer’s offer against at least one outside quote; small differences in rate or term structure compound over years of payments
| Item | Detail |
|---|---|
| What it is | A loan or lease arranged at the point of sale through the equipment dealer |
| Main advantage (new equipment) | Manufacturer-backed subsidized rates or cash-back promotions |
| Main disadvantage (used equipment) | Higher rates and lower advance ratios than bank or broker offers |
| BDC equipment loan LTV | Up to 125% of purchase price (covers shipping, installation) |
| CSBFP equipment loan limit | Up to $500,000, rates capped at prime plus 3% |
| Bank of Canada policy rate | 2.50%, as of October 2026 |
How dealer financing programs work
When you buy equipment through a dealer, the salesperson will typically offer financing as part of the purchase. There are two main structures behind that offer.
Captive (manufacturer) programs
Large manufacturers like Caterpillar, John Deere, Kubota, Toyota and Hyster run their own finance companies. These captive lenders exist to move the manufacturer’s equipment. They can offer subsidized interest rates, deferred first payments, or cash-back promotions because the manufacturer absorbs part of the financing cost to close the sale. BDC notes that deals on new equipment through the manufacturer’s finance company are “generally very compelling.”
These promotions are tied to specific models and time periods. They apply to new equipment from that manufacturer only. If you are buying used equipment, the captive program either will not cover it or will price it at a higher rate without the manufacturer subsidy.
Third-party dealer arrangements
Dealers that do not have a manufacturer-backed finance company, or that sell used and multi-brand inventory, work with third-party finance companies. The dealer introduces you to a financing partner, and in some cases earns a fee or commission on the deal. The rates here are set by the finance company, not subsidized by a manufacturer, so they tend to sit higher than captive rates on comparable new equipment. Third-party dealer financing can still be convenient, but you are no longer benefiting from a manufacturer’s marketing budget.
What dealer programs cover (and what they may not)
A dealer finance program typically covers the purchase price of the equipment. Some will include delivery and setup. What they usually do not cover is the broader package a bank or BDC can offer:
- Higher advance ratios. BDC finances up to 125% of the purchase price, with the extra covering shipping, installation and training. Dealer programs rarely go above the purchase price.
- Principal deferrals. BDC allows borrowers to defer principal payments for up to 24 months at the start of the loan. Dealer leases may offer short promotional deferrals, but longer ones are uncommon.
- Longer terms. BDC offers equipment loan terms up to 12 years. Dealer programs tend to offer shorter terms, which pushes monthly payments higher on expensive equipment.
Dealer financing vs bank or broker financing
| Factor | Dealer financing | Bank or broker financing |
|---|---|---|
| Speed | Often same-day | Banks: days to weeks; brokers can be faster |
| Rate on new equipment | Competitive (may be subsidized) | Market rate based on credit profile |
| Rate on used equipment | Typically higher than new | Similar approach for new and used if the asset is strong |
| Loan-to-value | Usually the purchase price only | BDC up to 125%; banks vary |
| Payment flexibility | Limited; standard monthly payments | Skip payments, seasonal schedules, deferrals available |
| Choice of lender | One offer from the dealer’s partner | Broker submits to multiple lenders |
For a broader look at how different lender types compare, see our guide to equipment financing companies in Canada.
Heads-up: A dealer’s quoted monthly payment can look low while hiding a higher total cost. Always ask for the total cost of financing (all payments plus fees), not just the monthly amount. A lower payment stretched over a longer term with a large buyout at the end can cost thousands more than a slightly higher payment on a shorter loan.
What to compare before you sign
Before you sign a dealer financing agreement, get at least one outside quote and compare these terms:
-
Interest rate and rate type. Is the rate fixed or floating? Dealer promotions are often fixed for a set period, then convert to a floating rate. Ask what happens after the promotional period ends.
-
Total cost of financing. Add up every payment over the full term, plus the buyout or residual if it is a lease. Two offers with the same monthly payment can have very different total costs depending on the term length and buyout amount.
-
Buyout and end-of-term options. Dealer leases commonly include a residual purchase option. Check whether the buyout price is fixed upfront or set at fair market value later. A fixed buyout gives you certainty; a fair market value buyout does not.
-
Early payout penalties. Some dealer contracts charge a penalty if you pay off the balance early. Others charge the full interest regardless of when you pay. Ask for the payout terms in writing.
-
What is included. Does the financing cover delivery, installation, training, or warranty? Or is it the bare equipment only? The total cost comparison only works if you are comparing the same scope.
-
Security and registration. Dealer finance contracts register a lien under the provincial Personal Property Security Act (PPSA). Confirm what assets the lien covers. Some contracts include a general security agreement that extends beyond the equipment itself.
Pro tip: Ask the dealer for the cash price of the equipment separately from the financed price. Some dealers fold the cost of a financing promotion into a higher sticker price. If the cash price is lower, you can use that number when getting an outside quote and compare the true cost of each option.
Tax treatment and government programs
When you own equipment through a loan, whether arranged through a dealer or another lender, you can claim capital cost allowance (CCA) on the asset. The CRA assigns equipment to classes with prescribed rates:
- General machinery and equipment falls under Class 8 at 20% declining balance
- Manufacturing and processing machinery qualifies for Class 43 at 30%, or Class 53 at 50% for eligible equipment acquired after 2015 and before 2026
If you lease the equipment instead, the lease payments are typically deductible as an operating expense. Loan interest is also generally deductible. Your accountant can confirm which treatment applies to your situation. For a deeper look at CCA and deductions, see our equipment financing tax benefits guide.
The Canada Small Business Financing Program (CSBFP) is also worth knowing about. It provides government-backed equipment loans up to $500,000, with floating rates capped at prime plus 3%. A 2% registration fee and 1.25% annual administration fee apply, and your business needs gross revenue under $10,000,000 to qualify. Dealers do not typically offer CSBFP-backed financing directly, so this is a program to explore through a bank or a financing broker.
How CBL Financial can help
CBL Financial is an equipment financing broker that works with lenders across Canada. If you have a dealer quote in hand, we can prepare a competing offer from our lender network so you can compare terms side by side. Funding goes up to $1,000,000, with terms from 24 to 72 months, and we work with new equipment, used equipment, and private sales. To see what your payments might look like, try the equipment financing calculator or apply online.
Frequently asked questions
Is dealer financing more expensive than a bank loan?
It depends on the equipment and the deal. On new equipment with a manufacturer-backed promotion, dealer financing can be cheaper than what a bank offers. On used equipment or through a third-party finance company without a manufacturer subsidy, rates tend to be higher. The only way to know is to compare the total cost of each offer, not just the monthly payment.
Can I negotiate the terms on a dealer financing offer?
Yes. The rate, term, buyout amount, and bundled extras like warranty or maintenance plans are all negotiable. Dealers expect some negotiation, and having an outside quote strengthens your position. Ask for the breakdown of equipment price versus financing cost so you can see where there is room to move.
What happens if I want to pay off a dealer lease early?
Check the contract for early payout terms before you sign. Some dealer leases allow early buyout at any time with a small administration fee. Others charge a penalty or require you to pay all remaining interest regardless of when you exit. Get the payout formula in writing.
Should I lease or buy equipment through a dealer?
A lease works well if you plan to replace the equipment at the end of the term or want lower monthly payments. A loan makes more sense if you plan to keep the equipment for years and want to build equity in the asset. The tax treatment also differs: leasing lets you deduct the full payment as an expense, while owning lets you claim CCA and deduct loan interest. For a detailed comparison, see our guide to lease financing advantages and disadvantages.
Does dealer financing affect my ability to get other business financing?
A dealer lease or loan appears on your credit report and factors into your total debt load. Lenders evaluating you for other financing will consider your existing equipment obligations. This is normal and applies equally whether the financing came through a dealer, a bank, or a broker.
Can I finance used equipment through a dealer?
You can, but the terms are usually less favourable than for new equipment. The dealer does not benefit from manufacturer subsidies on used units, so the finance company sets rates based on the equipment’s age, condition, and resale value. A broker may offer a better rate on used equipment because the lender is evaluating the asset and your credit profile independently of the dealer relationship. For more on what lenders look at, see our equipment financing requirements guide.
General information, not financial advice.
