Like other types of leases, an equipment lease allows a person who owns equipment to rent that equipment to another individual in exchange for payment. Equipment leases can cover a variety of types of equipment, from vehicles, to farm equipment, to office equipment. Businesses can even rent computers or server space on another company’s machines with an equipment lease.
The Equipment Leasing Association of America, which oversees thousands of business agreements involving equipment leases, says that at least 80% of US companies lease their equipment at some point.
Types of Equipment Leases:
There are two basic types of equipment leases: operating leases, and capital leases.
Capital leases are sometimes also referred to as long-term leases, and have terms and conditions which cannot be cancelled without serious penalties. The lessee company potentially wants to buy the equipment they lease, and in many of these agreements, the renting company owns the equipment through monthly rental payments.
Operating leases are short-term leasing agreements, and the company renting the equipment has only a temporary need for the items with no intention to buy those particular pieces of equipment.
Elements of an Equipment Lease:
If you own equipment that others might want to lease, you can make your lease agreement as individual as necessary. However, here are a few things to consider when writing a lease agreement:
- Are you dealing with an individual or a company?
- Will you lease the equipment as an individual or as a business?
- How long as the lessee company been in business, or is the individual a trustworthy professional?
- What terms and conditions should you write into the lease to ensure your equipment is unharmed?
- What conditions would you put in place for recourse if your equipment is damaged, lost, or stolen?
- Should you purchase insurance to cover your equipment? Or should you require the lessee to purchase the equipment?
- How much should you charge to cover the costs you incurred by purchasing and storing the equipment? This is especially important if your business is specifically to lease equipment.
- Who pays property taxes?
- Who is responsible for repairs, not just the cost?
- Are there options for upgrading or trading the equipment before the lease expires?
Why Should I Use an Equipment Lease Template?
If you find you want to lease equipment like tractors, amplifiers, computers, or other specific equipment, you will need a lease agreement template to get started. Templates can help you keep track of all the information you need to include. Once you develop an equipment lease agreement for a specific type of equipment, you can reuse the writing and the template, as well. Download our free equipment lease templates and see which format works best for you!