Operating Lease
An Operating Lease is priced to take account of the residual value in the machine tool. As a result, this normally has the benefit of reducing the rentals.
An Operating Lease is 'off balance sheet' and therefore will not increase the gearing ratio of your business. In order to obtain an Operating Lease you must be sure of the usage of the machine as this could affect the estimated residual value. Often with an Operating Lease, it is normal to have an agreement that includes preventative maintenance and possibly some form of breakdown insurance.
Potential Benefits
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Lower rentals than Hire Purchase or Finance Lease
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Off balance sheet funding
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Use without ownership
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Preserves other lines of credit
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Tax relief for rentals - normally 100% allowable
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No disposal problems
TYPICAL EXAMPLE
Machine Cost |
£50,000 + VAT |
60 Monthly rentals |
£755 + VAT |
3 rentals + VAT payable as deposit |
|
Residual value - underwritten by lender |
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