Products | Operating Lease
Designed for hirers who want the use of a machine without the " risks and rewards of ownership " - in particular, an interest in the disposal proceeds. The hirer pays rentals based on equipment cost less a projected future disposal value. The lessor estimates and underwrites the residual value and, as the owner, takes full risk on this.
The period of hire and rentals are fixed in advance, normally between 24 - 60 months with equipment being returned to the lessor at the end of the agreement.
Under a simple operating lease, the lessee is responsible for all operating costs including servicing, maintenance, insurance and repairs, since the machine must be returned to the lessor at the end of the agreement in full working order and in a condition that is specified at the outset.
Rentals are normally fully allowable against taxable income as a business expense and VAT is paid on each rental as it falls due. Return and operating conditions are linked to an agreed area covered by a machine.
Benefits :
 | Fixed rentals can be lower reflecting the residual value, particularly in shorter agreements, and capital outlay is reduced. |
| Enables machinery to be kept up to date, valuable where technology is changing rapidly or use is intensive. |
| Off balance sheet funding which can enhance financial ratios. |
| VAT is spread over the life of the agreement. |
| Lessor bears the risk of residual losses on the equipment. |
| Rentals normally fully allowable as a business expense in the year they are paid. |
| Hire Purchase |
| Finance Lease |
| Operating Lease |
| Contract Hire |
| Cashflow Matched Finance |
TECH5:
Rosedale House
Askham Bryan College
York YO23 3FR
Phone:
01904-778-355
Fax:
01904-706-892