How can you protect yourself against signing a bad lease?

First, recognize that the playing field is not at all level. The lessor has years of experienced and has had its lease form prepared by experienced counsel. Most leasing companies are honest and honorable. Even their leases can contain surprises for ill-prepared customers.  There are also leasing companies that prey on intelligent but inexperienced lessees and instruct their lawyers to write contracts that are downright misleading.

Here are a few ideas that may help. It goes without saying that they are NOT a substitute for hiring an experienced lawyer who will save you time and, in the long run, possibly a great deal of money and many sleepless nights:

1)    Do you know what the actual interest rate is being used to calculate your rent? Don’t be afraid to ask for it in writing and don’t let the salesman tell you he cannot give it to you for tax or other reasons. If it is different from what you were quoted, get a written explanation of why.

2)    Don’t agree to anything that prevents your examining and, if necessary, testing the equipment before the lease begins. Do not ever sign an “acceptance certificate” before the equipment is delivered and is proven to be what you want, operating the way you want.

3)    Read the lease and ask questions. If it is a $1-purchase lease or “lease-purchase” it should have no provision for automatic renewal or the payment of anything other than interest during the “interim” period between delivery and the first rent payment. If the lessor proposes to use the same lease for your lease he uses for his fair market purchase option deals, make him strike the sections that you would not sign if the “lease” were a loan from your bank.

4)    Understand all charges. What happens if you do not carry insurance as required? Is there a documentation fee up front and what does it cover? Are there other fees payable during the lease term you did not expect?

Remember, most leasing companies are not trying to trick you or take advantage of you, but it is not their responsibility to explain if you do not ask questions. There are some really bad guys out there, though and their answers to your questions may identify them. There are no stupid questions, only stupid mistakes. Do not make them.