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Commonly Asked Questions about Equipment Lease Agreement

Leasing companies with operating lease models make money through three streams: lease establishment fees, re-selling returned assets on the secondary market, and extended lease payments. A lessor invests upfront in the devices they lease back to customers, and they legally own them.
Instead of shelling out a massive upfront payment to own the equipment, you make regular, predictable installments to the leasing company (the lessor). This frees up your cash flow for other important things, like inventory, marketing, or even that much-needed vacation!
An equipment lease is a contractual agreement between the owner of the equipment (the lessor) and a small business owner (the lessee) who wants to use the equipment for a specific period in exchange for set payments. In some cases, the lease allows the lessee to purchase the equipment at the end of the term.
An equipment lease is an agreement in which one party (the lessor) gives the other party (the lessee) the right to have and use (but not own) the lessors equipment for a certain period of time.
Longer-term operating leases result in the initial recording of a right of use asset, generally matched by a corresponding liability to make payments. Over time both the asset and liability are reduced while rent is paid and expensed, usually on a straight-line basis.
The following are examples of how an equipment operating lease would be structured. Fair market value lease With a fair market value lease, you make payments and use the equipment during the lease. At the end of the lease, you have the option to buy the equipment at fair market value, return it, or renew the lease.
After your rental period expires, you must return the equipment. With a leasing agreement, you sign a contract for an extended time, and you may have the option to purchase your equipment at the end of your lease.
Monthly Lease Payments Its determined by a combination of the equipment price, your down payment, and the lease term, type, and interest rate. Missing lease payments could result in the manufacturer or leasing company taking possession of the equipment, so its important you ensure you can afford these payments.