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Equipment Lease Agreement

This Agreement is entered by and between Jonas Adam, individually or collectively as the "Signee" and Jane Smith, as the "Signer", together referred to as the "Parties".
The Contract is dated [the date both parties sign].

1. Agreement terms

The Parties agree that the following agreement is dependent on the terms presented as follow:

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The rapid growth of technology today can make it difficult for a new business to distinguish itself in the market. Many industries, such as the tech and design sectors, require companies to stay up-to-date with the latest technologies and features. This can place an enormous financial burden on companies that may not be prepared for such an investment. 

If your business is just starting out, or trying to stay relevant in an increasingly younger field, you should consider renting or leasing your equipment. This option allows you to try out different pieces of machinery to see what makes the most sense for your needs. It also helps you supply your team with a higher-end product than you might be able to purchase outright. 

There are many companies that will rent you equipment, and even third-party organizations that can facilitate B2B leases. If you are in an industry that requires frequent upgrades, this can save you a lot of money in the long run. However, leasing will eventually cost more than the purchase price of the equipment, so you should think carefully about how long you intend to use each product. 


Selective Focus Photo of Man in Official Shirt  Sitting in Office  Working on Laptop
Renting computers can help your office stay current. (Source)


What Is an Equipment Lease Agreement?

If you decide to move forward with renting, you will need to complete an equipment lease agreement. This can be a complicated document depending on the type of equipment in question. It is always advisable to have the guidance of a qualified and experienced attorney before signing any legally binding document. And with or without an attorney, be sure to carefully review each term in the contract to make sure it remains beneficial to you and your team. 

At its most basic, an equipment lease agreement is a document indicating that one party agrees to loan the other party a specific piece or pieces of their equipment for a certain period of time in exchange for a pre-determined amount of money. An equipment lease agreement is similar to a vendor agreement or subcontractor agreement but contains much more specific language pertaining to equipment rental. 

There are many, many ways to customize a lease agreement to fit your particular needs. For example, a lessee could also be responsible for maintenance on the machine during the loan period. Similarly, the lessee may be given the option to purchase the equipment at the end of the loan period. 

If you are undertaking a specific project with another company, you may also consider a joint venture agreement instead. That document allows for the sharing of resources as part of a bigger endeavor. 


Why Would I Use an Equipment Lease Agreement?

Unless you are just borrowing a friend’s DVD play for the weekend, you should always document an exchange of goods or services. Almost any piece of machinery can be covered by an equipment lease agreement. However, low-cost items such as individual printers are usually purchased outright instead of rented. Similarly, specialized forms exist for some equipment, such as a vehicle lease agreement

When you are leasing equipment to supply your business, it is likely an extremely expensive undertaking. You should never leave such transactions to informal or verbal arrangements. Doing so leaves you and the lessor exposed to serious risk of a lawsuit, loss of property, and potentially more. It is better to be safe upfront than regretful later on. 


Low Angle Photography of Orange Excavator Under White Clouds
Heavy machinery like this may necessitate additional documentation. (Source)


How Do I Use an Equipment Lease Agreement?

The first step with any agreement is to clearly understand your needs and goals. If you are the proposed lessee, you need to know how much you are willing to spend, and what responsibilities you are willing to take on. Do you want to be responsible for taxes as they arise, or do you want that built into the overall cost? 

If you are renting from a specialized equipment rental company, they will likely have their own standard rental agreement form. Do not assume that the terms of this are fixed or that they represent your best interest. Read over everything carefully, ask for clarification on terms you do not understand, and ask for modifications where necessary. 

Once the terms have been agreed upon and reviewed, each party should sign and date two copies of the agreement. Use of a notary public is also recommended to ensure validity and prevent future disputes. 


The Elements of an Equipment Lease Agreement

While each lease agreement should be tailored to the specific needs at hand, there are a number of terms that should be considered standard to most agreements. This article will provide a non-exhaustive listing and some basic information to help you get started. 

  1. Identification of the Parties: This is a basic foundational element of any agreement. The document should clearly state the names and contact information of the lessor and lessee. This is especially important if any agents or representatives are negotiating on behalf of a business. 
  2. Effective dates: The lease should indicate the date at which it was signed, when the agreement becomes effective, and what period of time is covered by the agreement. 
  3. Intent to lease: There should be a statement of purpose indicating that the lessor intends to rent the specified equipment to the lessee. 
  4. Payment schedule: Include details of the agreed-upon fee schedule for this rental. Include the amount, schedule, and any penalties. Include any other relevant payment information applicable to your situation. 
  5. Statement of ownership: It should be clearly stated that at no time will ownership of the equipment transfer from lessee to lessor, unless agreed to in another document. 
  6. Description of equipment: If you plan to have a long-term relationship, it may be best to include equipment descriptions as appendices instead of including them in the main body text. This prevents you from having to redo the entire agreement each time you lease. Describe the equipment in as much detail as possible, including make, model, color, size, and serial numbers as relevant. 
  7. Responsibilities of each party: Describe which party will be responsible for ongoing maintenance, repair, upgrades, and so on. If applicable, include information about equipment storage and what condition it is expected to be in upon return. Document the steps to be taken in the event of theft or loss of the equipment. Describe requirements for insuring the equipment.
  8. Warranties: There are a number of different warranty clauses that may be included. Basically, these serve to indicate what the lessor and lessee are guaranteeing about the equipment being leased. This might refer to its functionality, how it will be used, etc. 
  9. Liabilities: Decide how you would like to handle liability for loss to or damage of the equipment during the rental period. Is it the responsibility of the lessee? Typically a lessee will be responsible for loss or damage that occurs and is expected to have insurance to cover the associated costs. 
  10. Default / Failure to comply: In tandem with the responsibilities of the lessee, list out the circumstances that might place a lessee in default of the agreement. Typically, this would include a failure to pay, misuse of property, or misrepresentation of self. Describe the actions available to the lessor in those situations. 
  11. Termination of agreement: Decide how each party will be able to terminate the agreement ahead of schedule if needed. Are there fees that will be charged? How will this impact issues of storage, maintenance, and taxes?
  12. Returning equipment: Describe how the lessee is expected to return the leased equipment at the end of the rental period. Does the lessor require specific drop-off procedures? How will the receipt be confirmed and documented? 
  13. Signatures of all parties: All involved parties must sign and date the agreement, preferably in the presence of a notary. If representing businesses, list official titles and roles in this transaction. Date the signature and make copies. 


Again, this is not an exhaustive list of the necessary parts of an equipment lease agreement. Each agreement will be customized to the lessee and lessor at the time of the transaction. It should contain provisions to protect both parties from fraud, negligence, and disagreement. For high-value items, consult a lawyer to make sure you are protected in the event of a dispute later on.