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Capital Equipment Finance > Asset Finance > Operating Lease
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What Is an operating lease?

An operating lease is a contract that allows for an asset’s use but does not convey ownership rights of the asset. This is especially useful if you need a flexible solution.  Pay a regular instalment to cover the use of the asset over a pre-determined time. At the end of the agreement you can hand the asset back to the finance company, negotiate to buy it , or start again with a new one. It’s up to you.

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The key advantages of an operating lease

  • No ownership: Not owning an asset can be beneficial because you won’t have to pay for repairs or maintenance.
  • Renting may be cheaper: Renting is generally much more affordable than purchasing, benefitting smaller or newer businesses that don’t yet have the financial strength to collect expensive assets.
  • Short-term: You’ll only need to lease the asset for as long as you need it, reducing the overall costs of purchasing, maintaining, and selling it if you no longer need it.
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The key disadvantages of an operating lease

  • No equity: When you lease, you don’t gain any equity
  • Financing costs: You might incur financing costs with a lease, such as interest
  • Might pay more than market value: Depending on how long an asset is leased, the total cost could be more than the market value at the time the lease originated.
  • Continuous terms renegotiation: Many leases are short-term. This means the lessor and lessee will renegotiate terms every time the lease expires. This provides the lessor an opportunity to raise rates or fees.

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