Equipment Leasing

An equipment lease is a legally binding and generally non‐cancellable document that details an agreement between two parties: The lessor is the party that owns the asset, and the lessee is the party that uses the asset. Most businesses in the United States lease equipment at some point. Many of these companies use leasing to finance the eventual purchase of the equipment. This chapter elaborates on the various types of leases, the advantages and disadvantages of leasing over purchasing, the lease process, the effective costs of leasing, and negotiating points. The chapter also explains in depth the different equipment lessor types. Equipment leasing is the most readily available type of capital for businesses. Since access to capital affects the value of a business, equipment leasing probably does more to increase the value of private companies than any other capital type. Equipment leases are also the most tailored form of capital. Equipment leasing often eases the transfer of a business because operating leases tend to slide through to the new owner. Even finance leases typically can be re‐worked to suit to the next owner. Some buyers employ an equipment sale leaseback as a source for a cash down payment.