What Is an Equipment Lease Agreement?
An Equipment Lease Agreement is a written contract between the owner of the equipment (lessor) and the user (lessee) that allows the latter to use the equipment for a specified period of time in exchange for periodic lease payments. This document can be used for vehicles, factory machinery, and other tangible property, except buildings. Traditionally, it is used as a convenient source of finance, and it helps to avoid the risk of obsolescence. This contract can be used by individuals and companies alike. If you wish to create your own equipment lease, you can browse our library of equipment lease agreement templates.
Traditionally, equipment leases can be grouped into the following categories:
- A capital lease – an agreement to lease equipment needed for a long time. Very often the lessee ends up purchasing the equipment after the end of the lease period;
- An operating lease – an agreement to use the equipment for a short period of time. Usually, the lessor bears all the risks in the agreement, including repairs and maintenance.
There are no particular requirements for the equipment lease contract terms and conditions, but it is recommended to state the names and the contact information of the parties, the duration of the lease, the amount of rent and the method of payment, the rights, and obligations of the parties, the remedies for breach of contract, and the cancellation and renewal provision. Once the document is signed, the lessee gets the right to use the equipment for periodic payments. The lessor retains ownership of the property and has the right to cancel the agreement if the lessee breaches the contract.