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Canadian equipment leases are usually sold as “easy monthly payments” — but the real story is in the contract. The biggest problems I see aren’t from the headline rate; they’re from hidden fees, vague buyout language, and fine-print clauses that quietly shift risk onto the business owner.
This guide walks through how Canadian equipment leases are structured, the common gotchas, and a practical checklist you can use before you sign anything from a dealer, bank, or non-bank lender.
Key point: A typical Canadian equipment lease is a package of a few documents: the master lease, a schedule for each asset bundle, and some add-on clauses. If you know where each piece lives, it’s much easier to spot hidden costs.
Most commercial equipment leases follow a fairly standard pattern:
The challenge: hidden fees and clauses are spread across all of these. It’s common for interim rent to sit in the MLA, extra fees in a “schedule of charges,” and buyout details buried in Schedule A.
If you work with a financing advisor like Mehmi on equipment leases or an equipment line of credit, part of the job is pulling all of that into one clear picture before you commit.
Key point: The monthly payment is only one part of the price. Lessors also make money on fees, timing, residuals, and contract options — and that’s where most surprises live.
The obvious, “visible” items are:
The hidden pricing levers often include:
Industry articles and Canadian leasing FAQs show how common these non-rate charges are: nearly all equipment lessors will add a one-time documentation fee and may also charge interim rent, default fees, and other admin costs as part of their revenue model.
A good lease structure is less about chasing the lowest rate and more about asking:
“If I add base payments, fees, buyout, and tax together, what is my true total cost and risk?”
Mehmi’s online calculator is built to do exactly that kind of apples-to-apples comparison.
Key point: Documentation and admin fees aren’t evil by themselves — but in Canada they can range from reasonable to ridiculous. You want them clearly disclosed, sized fairly, and charged only once.
Canadian equipment lessors commonly charge a one-time documentation or administration fee to cover credit reports, PPSA registrations, courier costs, and internal processing. Canadian Dominion Leasing, for example, openly lists credit reporting, lien searches, administrative fees, and PPSA filings as the costs this doc fee covers.
You’ll also see this fee called:
Industry sources suggest that for SME leases, these fees often range from tens to a few hundred dollars, and that they should generally not exceed one monthly payment or be charged more than once per schedule.
What to do:
To protect their security interest, lessors register your lease under the Personal Property Security Act (PPSA) in your province. Some will fold the government fee into the documentation fee; others show it separately.
You’re mainly looking to confirm:
Depending on the lessor, you may see:
Bundling soft costs can be helpful when you’re using equipment financing to fund a full project, but make sure the amounts and tax treatment are clear on the schedule.
Key point: Two of the nastiest surprises are charges for odd days before the lease starts (interim rent) and evergreen clauses that extend your lease if you miss a notice date. Both can be controlled if you know to ask.
Interim rent is a per-diem charge from delivery/acceptance until the official start date of the lease. Lessors argue it’s fair: they’ve paid the vendor, you’re using the gear, but the regular schedule hasn’t kicked in yet.
US and Canadian equipment leasing commentary describes interim rent as a standard concept: once the equipment is delivered and accepted, the lessee pays pro-rata rent until the first full payment date.
Where it becomes a “hidden” cost:
How to protect yourself:
An evergreen clause automatically extends the lease (often month-to-month) if you don’t give written notice, sometimes 60–180 days before the end date.
In equipment leasing best-practice articles, evergreen provisions are routinely listed as a key hidden-cost risk: if no notice is provided, the lessee can end up paying extra months at full rate even after they’ve fully recovered the equipment’s value.
What to watch for:
Best practice:
Key point: The lease end is where a lot of owners get stung — especially on FMV buyouts, vague return standards, and return logistics that are all your responsibility.
FMV leases keep payments lower because the lessor expects to recover value at the end, either by reselling the asset or by selling it to you at FMV. The risk is when “FMV” is never defined.
Red flags:
With fixed buyout leases (e.g., 10% or $1), the risk is lower because you know the price up front, but you still want that buyout clearly stated on the schedule.
Return language often covers:
If the bar is set too high or too vague, lessors can add reconditioning fees at the end. Some finance companies also charge:
Unless the contract says otherwise, you’re usually responsible for:
That can be a large cost for heavy gear or built-in equipment (ovens, HVAC, production lines). If your intent is to own the equipment long-term, this is yet another reason to push for a fixed-buyout lease or a transition into ownership via refinancing or sales leaseback near the end of the term.
Key point: Your lease doesn’t just set payments — it also decides who is responsible when something breaks, fails, or causes damage. Insurance and maintenance clauses quietly move a lot of risk from lessor to lessee.
Many leases say you must:
If you don’t, the lessor may:
For mission-critical assets (e.g., production lines, medical devices, trucks), consider whether it’s smarter to bundle maintenance through the vendor or lessor, or to control it yourself.
Canadian equipment leasing FAQs are clear: insurance is required on all leased equipment, usually for full replacement value, with the lessor named as loss payee.
Typically you’ll be required to carry:
Broker and legal commentary emphasizes that the loss payee clause ensures the lessor is included on any claim payments and notified of cancellations or changes.
Watch for:
Mehmi will typically work with your broker so the coverage needed for heavy equipment financing, truck and trailer financing, or other eligible equipment is clear and priced into your decision.
Key point: The “what happens if something goes wrong” section might be the least fun to read, but it’s where a minor cash-flow issue can turn into a major problem if the clauses are aggressive.
Common default triggers include:
Once default is triggered, the remedies often let the lessor:
Legal practitioners who work on Canadian equipment lease enforcement note that these remedies are standard and regularly used in debtor-creditor litigation.
You’ll also see:
You can’t always remove these, especially if you’re using leasing to get past a bank “no.” But you can:
Key point: Vendor financing programs can be great — especially on new equipment — but 0% leases, deferred payments, and “no money down” offers almost always hide extra margin in fees, residuals, or equipment pricing.
BDC’s guidance on vendor financing is blunt: vendor deals can be compelling, but you need to read the fine print and shop around.
Typical promotional hooks:
Where the economics really move:
When Mehmi participates in a vendor program, the goal is to keep these levers transparent: dealers can still offer flexible payments, but business owners see exactly how price, fees, rate, and buyout fit together. If a vendor offer is on the table, it’s worth getting a second quote from an independent partner and comparing total cost over the term.
Key point: You don’t need to become a lawyer, but you do need a repeatable process. This 30-minute review catches 90% of issues before you sign.
From the lease schedule(s), write down:
Then:
Flip through the MLA and any fee schedule for:
If anything is unclear, ask for a simple written explanation. If you don’t like the answer, that’s a signal to renegotiate or walk.
Finally, look at:
If you’re about to sign a large or multi-asset deal — for example, an entire fleet or production line funded via heavy equipment financing or truck and trailer financing — it’s worth having your accountant or lawyer review the package too.
Mehmi can also help “translate” a lease quote you’ve already received into plain English and suggest alternatives (like using refinancing or sales leaseback or invoice or freight factoring) if the fine print on your current offer is too aggressive.
Background
A BC-based manufacturing company needed:
The vendor’s preferred funder offered a “0% FMV lease, no payments for 90 days” on a combined ticket of $650,000 plus tax. The owner was excited — until their accountant suggested a closer look.
What the contract actually said
When they ran through a review similar to the one above, a few things jumped out:
When the accountant modelled realistic interim rent, likely FMV at the end, extra months from a missed notice, and the overpriced insurance, the supposed 0% deal effectively added more than $40,000 in hidden cost over the term.
How Mehmi restructured the deal
The company went to Mehmi for a second opinion. Together, they:
The end result:
The owner’s summary:
“The first offer looked cheaper. The second offer was actually cheaper — once we read what we were really signing.”
1. What are the most common hidden fees in equipment leases in Canada?
The big ones are documentation/admin fees, PPSA/registration charges, interim rent, end-of-term inspection or restocking fees, and forced-placed insurance if you don’t show proof of coverage. Canadian lessor FAQs openly describe documentation fees to cover credit reports, lien searches, and PPSA filings, but the amounts can vary widely — so you want the dollar figure disclosed and reasonable.
2. Is interim rent legal, and how can I keep it under control?
Yes, interim rent is a standard concept: it’s a per-diem charge between equipment delivery/acceptance and the official lease start date, meant to compensate the lessor once they’ve paid the vendor and you’ve started using the asset. To keep it under control, align deliveries with your start date, cap interim rent in the contract, and consider splitting complex projects into multiple schedules under a master lease.
3. How do I know if my buyout clause is fair?
For fixed-buyout leases (e.g., 10% or $1), the main thing is that the buyout is spelled out clearly on the schedule. For FMV leases, you want the contract to define how fair market value will be determined — ideally with reference to objective appraisals or market data, not just the lessor’s sole discretion. Industry commentary on hidden fees regularly highlights vague FMV language as a source of disputes and surprise end-of-term costs.
4. Are lease payments and fees tax-deductible for my Canadian business?
Generally, yes. CRA’s guidance on property leasing costs says you can deduct the lease payments you incur in the year for property used in your business, and certain additional amounts if you and the lessor agree to treat the payments as principal and interest. Documentation fees and similar charges that are part of the lease arrangement are typically deductible as business expenses as well, but check with your accountant for your specific situation.
5. How do I avoid getting stuck in an automatic renewal (evergreen) on a lease?
Read the end-of-term section carefully and look for any clause that extends the lease if notice isn’t given. If possible, negotiate an automatic expiry instead of evergreen, or at least a lower renewal rate and a clear notice window. Leasing specialists warn that evergreen clauses are a common way lessees end up paying unexpected extra months at full rate. Adding reminders to your calendar the day you sign is a simple but powerful safeguard.
6. How can Mehmi help me evaluate a lease offer from a dealer or bank?
Mehmi can:
If you’d like a second set of eyes on a contract that’s already in front of you, you can start a conversation via Contact Us and share the key pages — it’s often easier to fix problems before you sign than to unwind them later.
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