What does an equipment lease cost? This is a question that is often asked by individuals who own equipment that they would like to lease for profit. So let’s explore this question and review some general information about equipment leases.
How Much Does an Equipment Lease Cost?
An equipment lease is a legally binding contract executed by the owner, called the lessor. A person who wants to use the equipment is called the lessee.
The equipment lease will include vital information about the agreement between the lessor and the lessee like:
- Description of the leased equipment
- Duration of the lease
- Cost of lease
Equipment leases are standard in all fields and industries, including technology, machines, or vehicles. It is common for owners to lease the following types of equipment:
- Earthmoving equipment like excavators
- Computers or printers
- Diagnostic tools
- Restaurant supplies
Equipment owners take a risk when leasing property, so they need the protection of a well-written equipment lease agreement. Many lessees choose to hire an attorney to draft this document. The equipment owner must protect themselves from loss or damages when the lessee has possession of the equipment.
A lawyer familiar with equipment leases will know what provisions must be included to protect the lessor and ensure the contract is legally binding.
Based on ContractsCounsel’s marketplace data, the average cost of a project involving an equipment lease is $787.50.
What’s Typically Included in an Equipment Lease?
The contents of an equipment lease will vary based on the industry and type of equipment. However, it is common to include the following boilerplate terms:
- Lease Duration. The amount of time the lessee will have access to the leased equipment.
- Equipment Market Value. The market value is important so the lessee knows the amount of insurance they need and what it would cost to replace the equipment if it is damaged or stolen.
- Costs. The equipment lease should include terms that include the cost of the lease, payment timelines, and how payments are to be made.
- Renewal options: If the lessee wants to keep the leased equipment longer than the lease provides, a renewal option will give guidelines on renewing the lease.
- Cancellation Provisions. Suppose either party wants to terminate the agreement early. In that case, provisions to end the lease and any penalties for early termination should be included in a termination clause.
- Tax Responsibility. A lessee may need to pay taxes on the equipment, depending on the signed lease type.
Types of Equipment Leases
There are two main equipment leases: capital leases and operating leases. If you are unsure what type of lease you should use, a business lawyer can help you make the right choice.
- Capital Lease. A capital lease agreement is a long-term equipment lease. It sometimes even includes a provision for the lessee to purchase the equipment when the lease expires. Under this lease, the lessee must maintain the equipment and pay for the taxes and insurance associated with the equipment. The lessee will record the assets and liabilities of the equipment in their balance sheet for tax purposes.
- Operating Lease. An operating lease agreement is used for short-term equipment leases. Throughout this lease, the lessor maintains ownership of the equipment and claims the equipment on their taxes.
Examples of Equipment Lease Projects
Equipment Lease Drafting Services
Some equipment leases deal with millions of dollars of the property, so many lessors hire a lawyer to draft their equipment lease. The lawyer will know what type of lease is needed and what provisions to include to protect the lessor.
State and local laws may dictate how property can be leased and how taxes work with leased property. An experienced lawyer will be familiar with these laws and educate the lessor on these laws and tax provisions.
Equipment Lease Services
It is typically understood that contracts tend to favor the drafter. Therefore, if a lessor hires an attorney to draft an equipment lease agreement, the lessee may want to hire an attorney to review the contract.
By hiring their attorney for review services, the lessee ensures that the contract is fair and that their interests are represented. The lessee is taking on a huge responsibility when they lease an expensive piece of equipment, so they need to understand the contract and be protected.
Equipment Lease Drafting Costs
Hiring a lawyer to draft an equipment lease will incur legal fees, and the lessor will be responsible for these fees. Drafting contracts takes the time and legal expertise of a licensed lawyer. Generally, the longer and more complex the document, the higher the legal fees.
ContractsCounsel’s marketplace data shows the average equipment lease drafting costs are $816.67 across all states and industries.
Equipment Lease Review Cost
If a lessee hires a lawyer for review services, they will be responsible for the legal fees. Review costs are generally lower than drafting costs, but lawyers must still be compensated for their time.
ContractsCounsel’s marketplace data shows the average equipment lease review costs to be $700.00 across all states and industries.
How Do Equipment Lease Lawyers Charge?
Lawyers that provide drafting and review services charge clients using two common fee structures: hourly rates and flat fee rates.
Hourly Rates for Equipment Leases
Hourly rate fee agreements are one of the most common ways lawyers bill their clients. A lawyer will have a set hourly rate, and they will periodically bill their client for time spent working on the client’s case or project.
This fee structure is beneficial for lawyers because they can bill for their time and employees to ensure they are fully compensated for a job. However, clients may be wary of an hourly fee structure because it is difficult to determine how much legal services will cost until the project is complete.
ContractsCounsel’s marketplace data shows the average hourly rate for an equipment lease lawyer ranges from $200 - $350 per hour.
Flat Fee Rates for Equipment Leases
When an attorney is hired for a specific project, like drafting or reviewing an equipment lease, they may charge the client a flat rate. Instead of billing hourly, the lawyer will estimate the project time and charge the client a one-time fee. Typically, the lawyer will want this payment upfront before they begin work.
Clients tend to prefer a flat fee because they know exactly what they will be paying for an attorney’s legal services. Therefore, the lawyer must specify what the flat fee rate includes and what legal services will incur additional charges.
ContractsCounsel’s marketplace data shows the average flat fee rate for an equipment lease is $787.50.
Get Help with an Equipment Lease
Do you need help with an equipment lease project? If so, post a project in ContractsCounsel’s marketplace to receive flat fee bids from business lawyers to handle your project. All lawyers on the ContractsCounsel’s platform are vetted by our team to make sure you are provided with top tier service.