How rentals and operating leases work?
A rental agreement or operating lease is a pay-for-use asset finance product that is structured between two and five years.
Benefits of rental and operating leases?
This finance structure is commonly used to:
- Avoid technology and asset risk
- Use OpEx rather than CapEx to fund equipment
- Smooth cash flow by agreeing to set payments over a specified term
- Incorporate servicing and disposal costs into their agreed cash outlays
A rental or operating lease can also offer operational flexibility by allowing the business to add or upgrade assets during the agreed period.
What happen’s at the end of the lease?
At the end of the agreement, businesses generally have three options:
- return the equipment;
- upgrade the equipment; or
- extend the agreement.