Equipment Operating Lease
An Operating Lease is simply a rental agreement. You avoid the risks associated with ownership and have no residual value liability.
At the end of your operating lease agreement you may simply return the Equipment and you owe nothing further which means no liability in terms of residual values or FBT for the company following the end of the lease.
Only available through businesses, the benefits of an operating lease vs finance lease are that working capital is maintained, lease rentals will be fully tax deductible if the equipment is used to generate taxable income and there is no resale value risk as the financier will own the vehicle at the end of the term of the operating lease. Operating leases can also include ongoing maintenance costs including equipment servicing and fuel costs all included in one regular monthly payment (fully maintained operating lease) which can greatly aid the business cash flow as precise equipment running costs are know well in advance.
For this reason, operating leases are generally the simplest path to equipment ownership for many businesses
Also very important feature with an operating lease is that the finance cost is known for a fixed period of time - an operating lease is great for budgeting the cost of your new equipment.
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