Equipment Lease Agreement Forms
An equipment lease, or equipment rental contract, is a legal agreement that specifies the rights and obligations between a lessor (who owns equipment) and a lessee (to whom the lease gives certain rights to possess and use the equipment). These equipment lease agreements may be tailored to meet your individual needs, whether you are the lessor or the lessee. Simply select your State and choose the equipment lease agreement form appropriate to your situation.
Is an Equipment Lease the Answer to Grow Your Business?
Many types of industries, such as trucking, software, medical offices, and others, lease business equipment because of the advantages it offers to allow flexibility in payments, tax advantages, protection against obsolete equipment, and more. Equipment leases may be offered through third party business equipment leasing brokers, or the manufacturer, or in some cases, banks.
Lease of equipment is seen in a multitude of commercial equipment lease situations, from a copier machine in a small corner store to a large industrial equipment leasing. Some types of equipment commonly subject to an equipment rental contract include:
- IT equipment
- Office equipment
- Restaurant equipment
- Computer equipment
- Medical equipment
- Fitness equipment
- Exercise equipment
- Commercial equipment
Equipment Leasing Benefits:
- Free Up Cash Flow-Rather than paying full retail price up front, payments are spread over time, freeing up cash flow.
- No Down Payment
- Preserve Credit Lines for Emergency Needs
- Tax Advantages -Section 179 of the US Tax Code creates a business deduction for small and medium sized businesses, allowing the full retail purchase price of equipment to be deducted in the tax year the equipment was purchased and put into use.
- Flexibility in Payments
- Avoid Technology Obsolescence-A business equipment lease, such as an IT equipment lease to lease computer equipment can include takeout, rollover, and upgrade provisions, which allow outdated equipment to be replaced, upgraded, etc. as provided in the terms of the equipment lease agreement. A takeout or upgrade clause is used so that outdated equipment can be upgraded or replaced under the lease agreement. This may trigger termination or other fees in some cases. In those cases, a rollover provision can be included to allow any fees to be "rolled over" into a new equipment lease.
- Equipment Lease Financing is Available
Basic Structures include:
An Equipment Finance Agreement - similar to a loan offering a fixed monthly payment that does not fluctuate. The lessee owns the equipment and the lessor releases their security interest when the financing agreement ends.
Lease Purchase Option - offers a fixed monthly payment and you own the equipment at the end of the lease term for a specified amount.
Percentage Purchase Option - offers a fixed monthly payment as well as a fixed purchase option. When the lease expires, you can purchase the equipment at a percentage of its original cost, renew, or terminate the lease and return the equipment to the lessor. You may also apply to upgrade to new equipment.
FMW Based Purchase Option - offers the lowest fixed monthly payment, and payments are typically fully tax deductible. The lessee?s options at the lease end are to buy the equipment at fair market value, renew the equipment lease, or return the equipment to the lessor. An upgrade to newer equipment may also be possible.
Fixed Purchase Price Agreement -this agreement has the lessee pay a fixed price at the end of the lease, which may be a certain dollar amount or range between a minimum or maximum amount. The larger the Balloon payment, the lower the monthly payment.
Terminal Rental Adjustment Clause (TRAC) Lease - provides a certain purchase price at the end of the lease term and falls under true lease requirements under IRS rules. At the end of the lease term, you may either purchase the item for a fixed price, or sell the item to an outside party. You keep any profit on a sale to an outside party over the option price. However, if you sell the property at a loss, then you must make up the difference between the option price and the sales price.
The Tax Relief Act of 2010 and the Jobs Act of 2010 benefited the Section 179 deduction for leasing equipment in the 2011 tax year.
The latest changes include:
- The deduction on equipment for lease was raised to $500,000.
- A higher $2 million limit on the amount of business equipment that can be bought now applies. Software, as well as most new or used capital equipment may be included.
- Bonus Depreciation is now 100% for eligible assets, but doesn't apply to used equipment.
When are leasing equipment agreements used?
Equipment leasing agreements are used in a wide variety of business equipment leasing situations, such as medical equipment leasing, IT equipment leasing, truck leasing, restaurant equipment rentals, fitness equipment leasing, office equipment leasing, leasing trucks, and many more. Whether you just need a copy machine, or a large commercial equipment lease, a business lease agreement may be used for lease of equipment of all types.
What are the benefits of equipment leasing?
Leasing equipment is a way for a business to save upfront costs, try commercial equipment before deciding to purchase, and guard against equipment becoming obsolete. Obsolescence of equipment can be avoided through upgrade, takeout, and rollover clauses. There are also tax advantages in the form of Section 179 deductions and depreciation.
Equipment leases allow a business to avoid taking on a large debt to put a downpayment on capital equipment, freeing up cash flow. Flexible payments can be set up in an agreement to lease equipment form. Many options for lease financing are also available.
Are there tax advantages to an equipment lease?
Under Section 179 of the Internal Revenue Code, a tax deduction up to $500,000 may be taken on new and used capital equipment for lease, and up to $2 million of equipment may be purchased. Software may also be included. For eligible new capital equipment, bonus depreciation up to 100% may be taken.
What is a lease option equipment rental agreement?
It is essentially an equipment lease combined with an agreement allowing the lessee to buy the leased equipment at the end of the lease term. This allows the business to obtain the lease of equipment now, but without having to pay full retail price up front. Such a business equipment lease is a form of seller lease financing.
Is lease financing available for an equipment lease purchase?
The are equipment vendors, manufacturers, leasing and financing companies, and others that offer a variety of equipment lease financing options. For example, there are equipment lease forms for a flat monthly rate that give you ownership when the term expires, some equipment lease agreement contracts combine a purchase option for a price when you lease business equipment. Many leasing and financing options exist to allow to create an equipment finance agreement tailored to your business' needs.
What types of sample equipment lease forms are available?
A business equipment lease can be used to lease equipment ranging from exercise equipment leasing, computer equipment leasing, medical equipment leasing, truck leasing, office equipment leasing, and much more. Equipment for lease is available in a wide variety of commercial business leasing situations, such as restaurant equipment, leasing IT equipment, fitness equipment and equipment rental lease for office equipment. An equipment lease calculator tool can be found online to help decide whether an equipment leasing agreement will save on capital equipment costs and improve your business' profitability.
What is a commercial equipment lease?
It is basically a rental agreement for tools and equipment used in business. A sample equipment lease may be used as an alternative to outright purchase. Lease equipment may include such equipment for lease as:
- IT equipment lease
- restaurant equipment
- fitness equipment
- office equipment
- medical equipment
- and many more