Contract Templates > Equipment Lease Agreement
Equipment Lease Agreement
If you’re in the business of leasing equipment, you’re going to want a strong contract to set expectations and protect yourself legally. We’ve made it easy to start customizing your own equipment lease agreement immediately with our free, fillable template. This template gives you a simple framework for creating, delivering, and getting equipment lease agreements signed quickly. Customize and deliver in minutes, then get it signed with built-in eSignature.
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An equipment lease agreement, otherwise known as an equipment rental agreement, is a document in which two parties agree to enter into a deal in which one (the lessor) allows the other (the lessee) to use a piece of equipment for a specified length of time. These are important because they create a binding commitment to previously chosen and agreed-upon equipment lease terms, making sure that both parties are bound to the terms they agreed to. Equipment lease agreements are commonly used in industries such as film production, construction, farming and agriculture, commerce, 3D printing, and service.
If you are a business owner or an equipment owner looking to make some money off of leasing your goods, an equipment lease agreement is critical to protect your transaction. Lessors are protected by having the lessee’s promise to provide the equipment. And lessees are protected from the lessee returning the equipment late, damaging the equipment, or failing to return the equipment at all.
Like an agriculture land lease agreement, an equipment lease agreement template tends to have terms regarding the lease duration, financial terms, payment, market value, tax responsibility, cancellation provisions, and options for renewing the lease. In these sections, both parties make clear how long the equipment will be leased for, how much money it will cost and how that money should be paid, data on the market value of the equipment, information about who will pay tax on the equipment, guidelines for how the agreement can be canceled (if at all), and details on how to renew the lease after it expires. Most if not all of these terms should appear in any equipment lease purchase agreement template Word that you download.
Examples of Equipment Lease Agreements
Now that you have a good idea of what an equipment lease agreement is, let’s go over some examples of equipment lease agreements. Some of the most common types of equipment lease agreements that exist include short term equipment rental agreement, lease to own, capital lease, and operating lease.
Your typical simple equipment lease agreement will usually fall under the short term category, in which a lessee leases a piece of equipment for a period of time of a few days, weeks, or months. This will typically include rentals of filmmaking equipment for several days of film production or maybe a week’s rental of a 3D printer for a specific project. On the other hand, businesses will sometimes need to rent equipment on a longer-term basis. A commercial equipment lease agreement will often last for months or years.
Sometimes, lessees will want to lease a piece of equipment as part of the process of deciding whether or not they are willing to purchase that equipment in the future. That’s where an equipment lease agreement with option to purchase comes in. This is an agreement with built in terms of how the lessee can permanently buy the equipment if they choose to. This can occur both for private lease agreements and commercial equipment lease purchase agreement.
A capital lease is a lease in which the equipment still belongs to the lessor for the duration of the lease, but the lessee takes on the economic burden of owning the asset for accounting purposes. That means that, as far as generally accepted accounting principles are concerned, the equipment belongs to the lessee. In contrast, an operating lease allows the lessee to use the piece of equipment, but without any of the rights of ownership. Unlike with capital leases, businesses do not have to account for the equipment they rent with an operating lease on their balance sheets.
Farm Equipment Leasing
One of the industries that most commonly uses equipment lease agreements is farming and agriculture. This field requires the usage of specific farm equipment leasing practices, which differ slightly from general equipment leases. This is because farm equipment is generally so large, expensive, difficult to transport, and is most often needed for long-term leases.
Generally speaking, a farm equipment rental agreement, whether that be a dairy farm lease agreement, a farm with strictly produce, or something else, will need to have terms about how the equipment will be transported, where it will be kept, and how it must be maintained.
There are significant advantages to entering into a farm equipment lease agreement as opposed to buying your own farm equipment. First, leasing farm equipment will usually not be considered as a direct liability on your credit statements, making it easier for you to maintain credit availability and borrow money. Leasing farm equipment also lets you have only the equipment you need when you need it, so you don’t have to keep around and pay for maintaining equipment you can’t use because of the season.
It’s also important to note that leasing farm equipment is inflation friendly. That means that, as the market value and cost of the equipment goes up year after year, you’ll continue to pay the original negotiated lease rate (provided that your lease duration was long enough to begin with). Finally, you should know that many a farm lease agreement form is made from a free equipment lease to own contract template, allowing you the option of keeping the equipment if you decide you want to.