Operating Lease
Typical rental contract for periods of 3 to 7 years
- The rentals are calculated on the difference between the cost of the asset and what the finance company considers it will be worth at the end of the term.
- Rentals paid are tax deductible.
- The asset and operating lease liability do not appear on your balance sheet.
- At the end of the contract you have options:
- Extend the existing rental agreement
- Return the asset to the Lessor (assuming it meets stipulated return conditions)
- Sell the asset on behalf of the Lessor and retain a percentage of the profit generated on sale.
