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Equipment lease
Also called capital lease, operating lease, true lease.
A contract to use equipment for a period in exchange for rent, with the lessor holding title and the end-of-term choices fixed at signing.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A true or operating lease leaves the lessor owning the asset and betting on its residual value, which is what makes the payment lower than a loan on the same equipment. A capital or finance lease transfers substantially all the risks and rewards of ownership and is treated as a purchase for accounting purposes, whatever the document is called.
Routine costs that are not in the payment: interim rent from delivery to the first scheduled payment date, documentation and UCC filing fees, personal property tax billed by the lessor and passed through annually, and insurance you must carry with the lessor named.
Leases are commonly assigned. The company that signed you up frequently sells the paper to a funding source, and thereafter you pay a stranger.
Where this one catches people
The hell-or-high-water clause makes rent unconditional. If the equipment fails, arrives late, is the wrong model or is never installed at all, the rent is still due, and an assignee who bought the lease takes it free of your claims against the vendor. Your remedy runs against the vendor, not the lessor. This is standard, generally enforceable in commercial leases, and the single most surprising clause in the document for anyone reading their first one.
Where you will meet this term
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Equipment lease — common questions
What does equipment lease mean?
A contract to use equipment for a period in exchange for rent, with the lessor holding title and the end-of-term choices fixed at signing.
Where does equipment lease catch people out?
The hell-or-high-water clause makes rent unconditional. If the equipment fails, arrives late, is the wrong model or is never installed at all, the rent is still due, and an assignee who bought the lease takes it free of your claims against the vendor. Your remedy runs against the vendor, not the lessor. This is standard, generally enforceable in commercial leases, and the single most surprising clause in the document for anyone reading their first one.
Is equipment lease the same as an interest rate?
Equipment lease is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does equipment lease apply to?
Equipment Financing.
Is there a worked example of equipment lease?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside equipment lease?
Assignment of contract, End-of-term option, Equipment finance agreement, Hell or high water clause, Interim Rent.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.