Operating Leases 2018-06-15T10:48:36+00:00

Operating Leases

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What are Operating Leases?

An operating lease is a form of asset finance which allows you to lease a piece of equipment, while you need it. An operating lease is very similar to a finance lease, although the former is usually for a shorter period of time, usually a small percentage of the equipment’s expected lifespan.

The shorter nature of operating leases allows you to pay a reduced rental payment as there tends to be more residual value at the end of the term.

During the lease period, you get to use the equipment as you would if you owned it, but without the upfront financial outlay.

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The Advantages & Disadvantages

Operating leases are a great choice for those looking to fund equipment over a shorter timescale but it’s worth looking over the advantages and potential disadvantages before making your decision.

Advantages

  • You don’t have to worry about selling the item when you no longer need it.
  • If the item loses a significant amount of value, it won’t negatively impact you.
  • The upfront cost of acquiring equipment using an operating lease is low.
  • Operating leases are a flexible and cost-effective way to acquire equipment for your business.
  • You can reclaim VAT on your rental costs.
  • Maintenance is usually undertaken by the lender.

Disadvantages

  • You will not benefit from the item for its entire useful life.
  • You will not benefit from any sale proceeds as you would when acquiring an item using a finance lease.

How Does It Work?

  1. You identify the item that you need to acquire.
  2. The asset finance provider will acquire the item on your behalf.
  3. A lease agreement is written up and you begin to lease the item from them for an agreed period at a set monthly payment.
  4. 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.

Getting Started

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.

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