How to Examine a Lease Agreement

Do your homework and read the terms of the lease carefully before signing. The following are some questions you’ll want to consider:

  1. What happens at the end of the lease? In the past, some leasing companies required that you return to them the exact same machine that they sent you originally, and they checked the serial number to make certain. However, more and more, companies are willing to be flexible and accept a computer that’s comparable in most respects to the one they loaned you.
  2. Do you have a good asset­-tracking and management system? Even though companies are becoming more patient and understanding about end-of-lease arrangements, you still have to return something to them in fairly good condition. If you constantly have trouble tracking and locating your equipment, you should buy rather than lease.
  3. Are there other end-­of-­lease terms? Can you buy the equipment and at what price? How strict will they be about the condition of the computers? Don’t be afraid to push back if the leasing company gives you trouble, because you may be negotiating a new lease at the same time you’re returning the old equipment.
  4. Who is responsible for maintenance and repair? While vendors will probably replace defective parts during the period of the lease, they usually don’t repair damage done by patrons, whether accidental or intentional.
  5. Does the lease lock you into any financial issues downstream? If possible, show the lease to your accountant, your director, your CFO or whoever it is that balances your books. The structure of the lease could have unforeseen consequences on your budgets and your cash flow, so you want to get their approval if possible.
  6. Does the leasing company require an up-­front down payment, security deposit, proof of insurance or some other hedge against losses on their part? Most likely, as a government agency, you won’t have to bother with this stipulation, but check the leasing agreement to make sure.