An operating lease is an equipment lease where you rent an asset for a fraction of its serviceable life. An operating lease is also known as a business contract hire, especially if it links to commercial vehicles.
What is an operating lease?
An operating lease is an equipment lease where the customer (or ‘lessee’) rents an asset for a fraction of the item’s useful life. An operating lease is a type of business contract hire that applies to commercial vehicles and other types of assets.
Operating leases explained
The fundamental kind of equipment leasing is an operating lease, in which the client does not assume any ownership or financial responsibilities for the device (such as upkeep expenses). An operating lease is a rental agreement where you rent an asset for your company for a short or medium period.
Another hidden benefit of operating leases is that it’s possible to upgrade regularly because they are usually short-term. Some facilities even allow you to upgrade your equipment during the term of the lease.
There may also be tax advantages to using operating leases and business contract hire instead of other forms of asset financing, such as the ability to offset rental payments against profits rather than showing them as an asset on the balance sheet.
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