Operating Lease
How it works
An Operating Lease lets your business benefit from fixed costs and predicted annual use. The equipment remains the property of the Lessor (us) and will need to be returned at the end of the lease term.
Operating Leases may be ‘off balance sheet’ for some customers dependent on the accounting standards adopted by the Lessee.*
* This information is only relevant to those reporting under FRS 102 and not captured by the reporting requirements of IFRS 16.
Features
- Lower rentals than a Finance Lease as they are based on the asset cost over the lease term and assume a ‘Residual Value’ of the asset
- Rental and return conditions are known at the outset
- Removes disposal process
- Removes risk of asset depreciation
- Low capital outlay
- ‘Off balance sheet’ financing as rentals may be treated as an OPEX rather than CAPEX
- Depending upon the asset type and term, your customer may be able to offset the rental payments against their taxable profit*
- VAT is payable on the rentals, not on the purchase price of the equipment
- Repayments can be matched to cash-flow and/or income stream
- We are also able to collect and distribute services and/or repair & maintenance payments enabling your customer to manage the costs with one rental payment
* Please refer your Customer to their Account of Financial Advisor for confirmation.
End of term option for the customer
- Retain – agree extension rentals for another agreed term
- Return – hand back the equipment to us
| 3 year hire operating lease agreement | |
| Asset Cost | £40,000 excl. VAT |
| Monthly payment profile | 33 months |
| Followed by 33 payments of | £863.36 + VAT |
| = equivalent of £199.24 + VAT per week | The financing example shown above is for comparison and illustration purposes only. |