What Is an Equipment Lease Agreement?
An equipment lease agreement is a written contract used for renting equipment. One party, referred to as the lessor, owns the equipment. The other party, called the lessee, pays to use it for a set time period and price. This agreement outlines the terms of use for the equipment, the duration of the lease, and the rental fees payable by the lessee.
Leasing equipment is different from buying it. When you lease, you do not own the equipment. Instead, you get access without paying the full purchase price upfront. This can be especially helpful for expensive or specialized equipment. At the same time, the owner can earn income from equipment they are not actively using while keeping ownership. Most equipment lease agreements in the US follow UCC Article 2A, which provides general rules for leasing goods. These rules cover issues like delivery of the equipment, responsibility for damage or loss, and what happens if one party does not follow the agreement. Many states have adopted their own versions of this law.
What Type of Equipment Can You Lease?
Equipment lease agreements work for many types of equipment, including:
- Vehicles
- Power tools
- Medical equipment
- Heavy machinery
- Electronics
- Event equipment
- Furniture
- Appliances
- Gym equipment
When to Use an Equipment Lease Agreement?
An equipment lease agreement form works best in the following situations:
- Long-term or recurring use: When the equipment will be used over weeks, months, or longer than for a one-time need
- High value of specialized equipment: If the equipment is costly, technical, or requires careful handling during use
- Business or individual leasing: When a business leases equipment to another business or an individual rents equipment to another person
- Helps prevent disputes: When both parties need clear rules for damage, payments, returning the equipment, and other responsibilities
- More affordable than buying: When purchasing the equipment outright is not practical or cost-effective
How to Write an Equipment Lease Agreement?
When renting out equipment, it’s important to set clear expectations from the start. Here are the main terms to include in an equipment rental lease agreement so everyone knows what to expect.
Identify the Parties
Start by listing everyone involved in the lease. This includes the lessor (who owns the equipment) and the lessee (who will use it). Be sure to include full legal names as well as contact information to avoid any confusion about who is entering into the agreement and taking the responsibility.
Describe the Equipment
Next, clearly describe the equipment being leased. This may include specifying the make, model, serial number, and condition of the equipment, as well as any existing damage. A detailed description can help prevent disputes about the equipment’s condition or whether the correct item was returned.
Choose the Lease Type
Decide how the lease will operate. Some leases run for a fixed period and end on a specific date specified in the equipment lease agreement. Others continue on a recurring basis until one party gives notice to end the lease. Choosing the lease type upfront helps both parties understand how long the arrangement may last.
Set the Lease Term
Specify the start and end dates of the lease. If the lease is ongoing, explain how much notice is required to terminate it. This helps avoid disagreements about timing and early termination.
Define Payment Terms
Explain how much the lessee will pay and when the payments will be due. Specify details such as acceptable payment methods, deposits, late fees, and any other charges. Clear payment terms reduce the risk of missed or disputed payments.
Set Return Rules
Be sure to clearly explain when and how the equipment must be returned once the lease ends. This includes specifying the return date, condition requirements, and whether delivery and pickup are required. Clear return rules help protect both parties.
Explain Maintenance, Repairs, and Insurance
State who will be responsible for routine maintenance and repairs. The agreement can also require insurance for certain types of equipment. Including these terms within the equipment lease agreement form can help clarify who is responsible for paying if the equipment requires service during the lease.
Address Liability
Explain who will be responsible if the equipment is damaged, lost, destroyed, or stolen. Moreover, specify who will be responsible if the equipment causes injury or property damage.
Choose How Disputes Will Be Resolved
Decide how disputes will be handled in case problems arise during the lease. The agreement may require mediation, arbitration, or another method.
Include Termination Terms
Finally, explain when and how either party may end the lease. This includes termination for violations, required notice, and what happens after the lease ends. This way, both parties can avoid any misunderstandings in case the agreement has to be terminated early. If there is an early termination penalty, it should be specified here.
Sample Equipment Lease Agreement
Take a look at a sample equipment lease agreement template below to see what terms to include. Then use our step-by-step questionnaire to customize and download it for free in PDF or Word format.
