So you are pondering whether you should lease or purchase the equipment needed to operate your new restaurant. You’re looking into leasing options. Unfortunately, the glossary of terms utilized by the leasing industry may be confusing. Here to help you figure it all out, we have assembled some of the more common leasing terms and their definitions. Remember that before you sign any leasing agreement, you should make sure that you understand all of the fine print, the type of lease you are securing, and the various options available to you when the lease term is up.

Operating Lease –  in an operating lease, the restaurant owner uses the equipment but the lessor still maintains ownership of the equipment.  This is an ideal plan for restaurants who have equipment that needs to be regularly updated, as this allows you to simply return the equipment at the end of the lease. There is no requirement in this agreement to purchase the equipment.

Buyout Options – Many lease agreements have a buyout option at the end of the lease, which basically means that you can purchase the equipment at the end of the term for a previously agreed upon price. In many cases, this is fair market value (FMV) while in others the price may be simply a dollar or so. It should be noted however that a low buyout option means higher payments throughout the lifetime of the lease.

Lease To Own – A lease to own agreement is one of the best ways for any restaurant to finance their equipment. The restaurant owner pays a monthly fee to lease the gear, and at the end of the term, they end up owning it. This method should be researched thoroughly before signing, since in some cases you may end up paying much more than you initially expected over the life of the lease.

Straight Lease – In these arrangements, the restaurant owner has no responsibility at the end of the lease. The leased restaurant equipment is simply returned to the lessor.  This represents a sizeable percentage of the leases that are out there.

Soft Costs –  The soft costs associated with equipment leasing include the installation of the equipment, training on its proper use, and any repairs that may be necessary. Many restaurant equipment leasing companies include these soft costs in the lease itself, which means it is paid for without the owner ever having to take extra steps to make sure they are provided for.

Preventive Maintenance Contracts – Preventive maintenance contracts are many times a part of restaurant equipment leasing because the lessor wants to make sure that the equipment they have out remains in top operating condition.  This means a professional technician having a look periodically at the equipment, performing necessary maintenance and catching any small problems before they have the chance to become a major issue.

LeaseQ is one of the leading providers of restaurant equipment leasing options in the United States. They offer a variety of leasing plans designed to benefit both small business startups as well as Fortune 500 corporations.