How Does It Work?
- You identify the item that you need to acquire.
- The asset finance provider will acquire the item on your behalf.
- A lease agreement is written up and you begin to lease the item from them for an agreed period at a set monthly payment.
- Once the lease period is over, the item is returned to the asset finance provider.
Is an Operating Lease Right For My Business?
Operating leases are ideal for items that are only needed for a set period of time, as they will usually be for a fixed, short term. This can be ideal for items that will quickly become obsolete or when newer, better models will soon be launched.
Operating leases allow for items to be regularly upgraded and can be a hassle-free solution for business owners. By removing the need to maintain and dispose of the item, a lot of time can be saved by acquiring your new equipment using an operating lease.
What Items Can Be Funded Using an Operating Lease?
We can consider funding for any asset, some common assets include:-
Printing equipment and presses
Forklifts and other handling equipment
CNC machines and tools
Operating Leases vs Finance Leases
Although they work in a very similar way in practice, once you scratch the surface, there are some key differences between the two. Understanding these can make a significant difference to the tax efficiency of your asset purchase.
Both allow you to acquire new equipment without having to fund the entire cost of the purchase upfront.
Operating leases are generally used for items which are expected to have a residual value at the end of the lease.
Finance leases are typically offered for most of the useful lifespan of the item. In addition, they have the advantage of allowing you to treat the item as if you owned it for accounting purposes, placing it on your own balance sheet. This allows you to offset depreciation, making it a potentially tax efficient option.
Operating Leases at A Glance
The lease is for less than the usable life of the item
The item is usually held off your balance sheet meaning that depreciation can’t be offset
Maintenance is usually handled by the lender
The asset is owned by the leasing company
To find out more about operating leases, or to get started with your application, enquire online now or call us on 01922 620008 and an asset finance expert will be in touch quickly.