Operating lease
Need equipment or new vehicles for a one-off project? Operating leases offer a smart way to access the assets you need, when you need them.
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What is an operating lease?
Buying new vehicles, equipment, or tools can be expensive, especially if your business needs to manage cash flow or regularly upgrade.
An operating lease lets you rent equipment instead of buying it. The equipment doesn’t go on your balance sheet, and you don’t own it at the end.
This type of lease gives your business flexibility and helps you access the latest tools or tech without a big upfront cost or long term commitment.
How does an operating lease work?
An operating lease is a contract that allows your business to use an asset without having to own it. A finance provider will purchase the asset on behalf of your business and allow you to use it for as long as you need to in exchange for affordable monthly payments. Once the contract ends, you'll simply be asked to pay the difference between the original price and the residual value upon expiration.
Operating lease example
Here’s an example of how an operating lease would work:
Here’s a breakdown of how the costs are calculated:
Why use an operating lease?
Avoid hefty upfront costs
Protect your cash flow and avoid large upfront payments for new equipment. Choose how long you'd like to keep the equipment for and, as long as you keep up with your monthly payments, you'll have full use without the burden of full ownership.
Fixed, affordable payments
Your monthly payments will be set out in a clear and transparent way before your operating lease agreement begins, helping you to budget and keep on top of your finances.
Accessing specialist equipment
Renting equipment through an operating lease lets you use specialised tools for a set time without buying them upfront, helping you stay flexible and efficient.
Who is an operating lease for?
Arranging operating lease financing can help your business to source assets that may have otherwise been unaffordable. It presents an accessible alternative for a small business that’s trying to grow, but would prefer to invest working capital into other areas.
What kind of assets can I get for my business with an operating lease?
You can use an operating lease to get a variety of assets for your business. Some common assets that businesses lease include:
How much does a car operating lease cost?
The cost of a car operating lease can vary depending on several factors, including the make and model of the car, the lease term, mileage limits, and any additional services included in the lease agreement. If you’re considering leasing a car, you could use our Business Loan Calculator to get an estimate of what your monthly repayments could look like. Keep in mind that the actual costs may vary depending on the specific terms of the agreement.
What are the advantages and disadvantages of an operating lease?
Advantages of an operating lease
Disadvantages of an operating lease
Are there other options available?
An operating lease can be a great option for many businesses, but you might want to consider other financing options to see which aligns best with your needs.
Here are some alternative ways you can fund the purchase of a vehicle or asset:
Finance lease: a finance lease typically provides the option to purchase the asset at the end of the agreement for a predetermined price. This option suits if your business is looking for eventual ownership without a significant upfront investment.
Hire purchase: with a hire purchase agreement, your business will make fixed monthly payments towards owning the asset outright. While this option offers ownership at the end of the term, it requires a larger initial deposit and may include interest charges.
Asset finance: asset finance encompasses various options tailored to different assets, such as equipment loans, or refinancing. This flexibility allows your business to secure funding for essential assets while preserving cash flow.
Business loan: while not specific to vehicle financing, a business loan can be used to purchase vehicles outright. A business loan will give you ownership from the start, but this means that you’ll bear the responsibility of maintenance, depreciation, and eventual disposal.
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