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What’s in a Name? A Lot if You Are Leasing

If you want to lease IT equipment, you have many options with regard to potential lessors (the leasing companies). In fact, some manufacturers lease equipment directly to their customers … or do they?

If you ever leased “XYZ” equipment, you may have leased the equipment from “XYZ” Financial Services. Although the company that makes the equipment and the lessor may share a familiar name (“XYZ”), they are almost always separate and distinct companies. If you enter the lease thinking you are leasing from the manufacturer or you are relying on the relationship between the manufacturer and the lessor, you could be setting yourself up for a rude awakening.

Our Take

There are several issues that must be addressed or at least understood whenever the manufacturer and lessor have similar names:

  • Validate that the warranties on the equipment flow through to you, that you receive the same warranties on the equipment that you would if you purchased the equipment.
  • When making a warranty claim during the term of the lease, you will look to the manufacturer and not the lessor; the leasing company is acting as a financing company and nothing more.
  • If you are unable to use the equipment while warranty work is being performed by the manufacturer, you must continue to pay rent (this is commonly referred to as a Hell or Highwater provision); you will not have the right to offset against any rent payments for warranty claims.
  • If the equipment spontaneously combusts due to a manufacturing defect, your rent is due without regard to whether you can use the equipment or not; you will not have the right to offset against any rent payments for manufacturing defects.

Flawed logic such as the belief that you are leasing from the manufacturer and the lessor will stand behind the equipment will get you in trouble. This isn’t to say that you shouldn’t use one of these lessors; the key is to recognize the limitations associated with companies that have similar names. Whenever you are leasing equipment, you are best served to think of the lessor as an independent third party, regardless of its name.