Equipment Leasing Terms and Phrases – Maintenance and Repair

By | September 7, 2023

For our ongoing series on equipment lease terms, phrases, and details, let’s discuss the maintenance and repair of your leased equipment. For simplicity, we can call this the “wear and tear” clause.

 used business vehicle leasing

The general purpose of this clause is related to the residual value I mentioned last post. When a lease agreement is made, the Lessor (that’s us) has an expectation that the equipment will have a certain value at the end of the lease. The Lessee (you) are generally paying for the usable life of the equipment during the time you have it. 

In order to arrive at the predicted residual value, the equipment must be both used in the manner it was intended, and also be maintained in accordance with the manufacturer’s specifications. 

In general, the terms regarding maintenance and wear and tear will look similar to the following (note: these are simply big-picture examples, and not legal statements):

The Lessee will: 

  • Keep the equipment in good condition and make non-warranty repairs at its own expense (depending on the equipment, there may be a further provision stating that repairs need to be performed by an authorized/licensed entity.) 
  • Keep the equipment properly maintained and serviced as per the manufacturer’s specifications/recommendations (again, perhaps by an authorized service entity. Oh, and keep records too.) 
  • Ensure the equipment is used properly, and only by competent, trained employees.
  • If applicable, keep/store the equipment at the agreed-upon location.
  • Not change or add to the Equipment unless agreed upon.
  • At lease end, return the equipment in good condition and working order, with ordinary wear and tear resulting from proper use.
  • Make the Lessor aware of any accidents, damage, or similar. 

In most lease agreements, assuming proper and intended use, the residual value is typically spot on. But if it is not at the predicted amount due to abnormal use – if there’s damage, excessive wear, or similar – the Lessee will certainly find themselves responsible for making up the difference between the actual value of the equipment and the residual value. 

*Note that there can be a gray area between what’s considered normal wear vs. excessive wear. The Lessor is the one who determines this, typically by referencing industry guides and manufacturer’s specifications.

It is always best to look at a lease agreement and leased equipment like you would if you were borrowing a tool from a friend, or better still, a beloved family member. You want to give it back in the expected condition, and while it’s with you, care for it as if it were your own. 

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