What happens at the end of an Equipment Lease?

Lease Group has one of the largest Partner Channels in the UK, with over 850 suppliers serving 1,000s of business customers nationwide. We are able to finance almost any equipment or asset type, from hosted telephone systems to coffee machines. We do this via our Partner Channel, a hand-picked pool of technology and equipment specialists who provide expert solutions for customers looking to upgrade their equipment, technologies and assets.

Equipment leasing is the perfect solution for companies in need of the latest equipment and technologies. It allows companies to spread a hefty upfront cost across a term that suits. Leasing isn’t just for businesses who cannot afford the upfront cost, it is utilised by corporates and a majority of companies listed in the FTSE 500 because of the many benefits on offer.

In an earlier post we explained the Equipment Leasing Process which, isn’t as convoluted as some might think. In fact, it’s almost identical to acquiring equipment via a cash purchase – only there is a lease contract to sign ahead of delivery and installation. The lease contract sets out the payment terms and also the conditions surrounding maintenance and the return of equipment.

But what exactly are the options at the end of the agreed term? What does the lessor allow the customer to do with the equipment once the rental period is over, and are their any costs involved?

End of Term Options

Once a lease contract reaches the end of the agreed rental period, the lessor (who at this point is still the legal owner of the equipment) exercises a number of options, which may include:

  • Instruct the customer to return the equipment to the lessor
  • Allow the customer to continue renting the equipment at an agreed rate
  • Title of the equipment transfers to a third party (such as the credit broker or equipment supplier)

In the event that the title transfers to a third party, it is standard practice for the third party to then present the customer with an option to retain the equipment – which is usually a one-time payment at a pre-agreed price.

If you plan to renew the equipment at the end of the term, it is worth asking your supplier if any residual value in the original equipment can be leveraged and offset against the costs of the new equipment – a practice which is very common in the vehicle leasing market.

Ultimately, which end of term option you exercise is up to you – and depends on whether you plan to renew or retain the equipment and what incentives your supplier puts in place to warrant an upgrade.