Purchasing major pieces of equipment can be costly. Not all businesses have the desire or resources to do so. Fortunately, they have the option to lease equipment instead. If your company is considering an equipment lease, it’s important to understand how it works. Aeton Law Partners is here to help Connecticut businesses draft, negotiate, and review equipment lease contracts. Here are a few essential things to know about them:
Why should I lease rather than purchase equipment?
Businesses, especially mid-sized and small businesses, don’t always want to purchase certain items. Machines and other pieces of equipment cost money, take up space and have to be maintained. In some cases, businesses only need specific equipment for a limited period of time. Your company may consider leasing, rather than purchasing, the following:
- Vehicles
- Computers
- Printers
- Furniture
- Telecommunication equipment
- Heavy machinery
- Diagnostic tools
Some advantages to leasing these items, instead of buying them, include:
No long-term commitment. Buying equipment essentially commits your company to it for the long term. Your business is effectively “stuck” with something you may not need a few years down the road. Leasing provides flexibility and allows your company to adapt to inevitable changes.
Simplifying the upgrade process. There’s a good chance your business will one day outgrow the equipment it currently uses. You could purchase new equipment, or you could lease it instead. This allows you to upgrade to a newer, better model, or something with more capacity to handle your business needs.
No down payment. Most equipment leases do not typically require a down payment as a condition. Rather, a lease involves borrowing equipment in exchange for paying certain fees. At the end of the lease or other terminating event, the equipment is returned and the fees end.
What’s included in an equipment lease contract?
Every equipment lease contract is different. Before deciding to negotiate or execute one, you should ask a knowledgeable Connecticut business law attorney. Your lawyer can review the terms of the contract and negotiate more advantageous ones.
No matter the piece of equipment involved, these contracts generally include such provisions as:
The duration of the lease
The lease duration will depend on several different factors, like the cost of the equipment and your company’s needs. These will, in turn, affect the fees your company pays.
Payment schedule
You will be required to make regular lease payments to secure the use of the equipment. Does your business have the requisite cash flow to make these payments?
The market value of the equipment
You will need to insure the equipment to protect it against loss and damage. To do so, you have to know the market value of the equipment.
Options to renew
You may wish to renew your equipment lease once the initial term ends. Or, the lease may have provisions that allow an automatic renewal under certain circumstances. It’s imperative that you know whether, and in what scenario, the equipment lease will renew.
Options to terminate
There should be termination provisions for ending the lease early. These may or may not come with a penalty. For instance, if the equipment isn’t damaged or defective, you should expect to pay an early termination fee.
Ready To Lease Equipment? Turn To Us First
Our firm regularly drafts, negotiates, and reviews business contracts of all sorts, including equipment leases. Whether you are the party leasing equipment to others or leasing from someone else, count on Aeton Law Partners. Give us a call today to learn more.