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Home > Finance > Leasing > Top Mistakes with Equipment Leasing
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Top Mistakes with Equipment Leasing
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When negotiating on equipment leasing contracts, small business and
corporate accounts should review all the legal terms in order to avoid
the top mistakes associated with leasing equipment. These rules are
applicable in multiple areas of equipment leasing from educational,
computer and engineering equipment leases.
Mistakes to Be Avoided in Contracts
One of the primary mistakes made when negotiating their lease is the
use of a very short contract. The short contract text may not address
issues involving problems with software in computer leases or
litigation issues such as employee piracy. Other issues that are not
addressed in many short contracts include:
• Software transaction agreements
• Troubleshooting Support Issues
• Clauses handling provider’s going out of business
It’s important to make sure that all parties have their expectations
clearly outlined in the contract. The contract helps avoid mistakes in
leasing equipment by detailing the obligations of both parties.
Contracts that possess clarity and completeness are important and the
shorter the contract, the more likely there will be legal risks and
ramifications for the company leasing the equipment.
Performance Details
The contract should detail the performance of the equipment. If someone
is leasing a computer system, a server or a backhoe, they need to know
that it will handle the load they are preparing to deliver to it. The
performance details are an area where equipment can fail in leasing if
they are not clearly stated. It’s important to make sure that both
parties have those issues clarified before closing on any contracts or
deals regarding performance issues.
Structure Defects
Structuring agreements is key to understanding where responsibility
lies. An equipment leasing agreement needs to stipulate the structure
of the deal. In other words, the salesman is unlikely be the primary
contact for system defects. The primary contact may be the manager in
charge of that account, but they will likely only handle negotiation
issues. Customer support issues may be directed elsewhere. That
structure and allocation of responsibility must be clearly spelled out
in the contract.
Equipment Hardware Leasing Specialties
When leasing computer equipment, there are often software leases that
are required. It’s important to coordinate the duration of the software
leases to be comparable with the duration of the equipment lease. It’s
important to ensure the compatibility of all leased equipment with
other equipment from different vendors. It’s also important to make
sure that a project’s start and completion dates are commiserate with
the equipment lease. Balancing the needs of the developers with the
equipment support is a difficult thing to assess, but it’s important to
make sure that the leases support the needs of the company small or
large.
Solicitors Not Welcome
Solicitors (lawyers) are often not consulted during the initial
drafting of equipment leasing. This is a mistake, especially for small
businesses that do not possess an in house legal team. Lawyers can help
smooth the transaction and avoid loopholes that might cause legal
problems for both parties during an equipment lease. However, when
utilizing a lawyer, it’s important to find one experienced in lease
transactions.
The Results versus The Resources
Be sure to clearly define the need for the equipment lease. Most
leasing companies see themselves as providing resources. Companies
large and small are not looking for a resource as much as they are
looking for a result. It’s the end of the line result they are seeking
most of all.
Communication
Clear communication is important from the get go. When negotiating for
an equipment lease, be sure to have all questions answered prior to
agreeing. Companies make a mistake in leasing equipment from a vendor
if they have trouble getting them on the phone or returning calls.
Those issues can lead to service problems in the future.
Be Realistic In Expectations
Client companies must be realistic about what they are expecting.
Vendors will usually negotiate and do their best to fill customer
requirements, however the client company must also keep in mind
industry standards and limitations. While technology continues to grow,
it’s important to realize that not every goal has been achieved as yet.
Short Term Versus Long Term
The final and most important mistake made in equipment leasing is
considering a contract as something that needs to be closed immediately
in order to make a deadline that occurs in the next few weeks.
Realistically speaking, avoiding looking at the long-term effects of an
equipment lease may leave the client with a piece of equipment they do
not need or a bad contract altogether. If their short-term goal is to
launch a new product or get the foundation of a new project started,
but the equipment will not help in the long-term goal, that should be
addressed.
Equipment leasing provides numerous benefits to businesses large and
small. It’s important to recognize the benefits, but to also avoid the
pitfalls of mistakes that can be made when negotiating an equipment
lease.
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