An operating lease is a hire rather than a credit agreement which means the organisation is paying simply to use the equipment for a certain time period. When setting up the lease the lender would estimate how much the equipment is likely to be worth at the end of the finance term (its residual value) and that amount would deducted from the lease value, reducing the payments.
The lessor, who is the owner of the asset, remains responsible for the maintenance and upkeep of the asset during the lease period. At the end of the lease term, the lessee has the option to return the asset to the lessor or to purchase it for a predetermined price.
The key difference between an operating lease and a finance lease is that in an operating lease, the lessee does not take ownership of the asset and does not recognise it on their balance sheet. As a result, operating leases are considered to be off-balance sheet financing, which can provide the lessee with greater flexibility and lower financial risk.
The specific assets that are included under an operating lease can vary depending on the needs and requirements of the lessee and the lessor. Here are some of the most common types of assets that can be leased under an operating lease:
You need to make sure that any financial decisions you make align with your goals and budget. But how do you know if an operating lease makes sense for your organisation? At Bluestone, our team of asset finance experts can help you determine whether an operating lease is the right choice for you.
We'll work closely with you to understand your goals, budget, and the nature of your organisation, and guide you through the advantages and disadvantages of operating leases. Our network of funders can provide you with a range of financing options to suit your needs, and we'll be with you every step of the way to ensure you make an informed decision.
With Bluestone, you can trust that our asset finance expertise will help you make the right choice. Contact us today to learn more about how an operating lease could benefit your organisation.
If you're considering an operating lease for your organisation, the next step is to reach out to our team of asset finance experts at Bluestone. We can provide you with a free consultation with your dedicated account manager to help you determine if an operating lease is the right choice for your needs.
During this consultation, your account manager will take the time to understand your organisation, sector, and goals, and provide you with a range of financing options tailored to your specific needs. They'll guide you through the entire process, from application to approval and beyond, and ensure that you have all the information you need to make an informed decision.
Whether you're looking to acquire equipment, machinery, or vehicles, our team of experts can help you find the financing solution that's right for you.
An operating lease is a type of lease agreement where the lessor provides the use of an asset to the lessee for a specified period, but the lessee does not own the asset. It is different from a capital lease, which is more like a loan where the lessee takes ownership of the asset after the lease period. In an operating lease, the lessor retains ownership of the asset and is responsible for maintenance and upkeep.
An operating lease can benefit your organisation by allowing you to acquire the use of an asset without the financial burden of ownership. You only pay for the use of the asset during the lease period, which helps to conserve your organisation's capital for other investments. Additionally, you can take advantage of tax benefits and have the flexibility to upgrade or change assets at the end of the lease period.
Assets that are typically eligible for financing through an operating lease include equipment, vehicles, and other tangible assets. Approval requirements vary depending on the asset and your organisations financial profile, but typically include credit checks and a demonstration of the ability to make regular lease payments.
The typical repayment period for an operating lease is anywhere from two to seven years, depending on the type of asset and the terms of the lease agreement. The impact on your cash flow will depend on the amount of the lease payments, which are typically lower than if you were to purchase the asset outright.
Penalties for terminating an operating lease early may depend on the terms of the lease agreement. However, we can provide guidance on how to handle this situation if it arises, such as negotiating a buyout option or finding alternative financing options. The goal is to ensure that the termination of the lease has as little impact on your organisation as possible.