A lease whose term is short compared to the useful life of the asset and amortises to a value recognised by the Lessor at the end of the term. The rentals are significantly lower than other methods of financing as they amortise to the deemed value of the asset taken by the Lessor at the end of the lease period.
An operating lease is where substantially all the risks and rewards of ownership are retained by the Lessor.
At the end of the lease term the customer can either:
- Return the asset to the Lessor, or
- Enter into extension rentals over a further period required by the customer often at a reduced rental
Some of the benefits of operating lease for the customer are:
- Off balance sheet financing improving financial ratios such as gearing.
- Ideal for businesses that require the asset for a certain period of time. For example, in line with an underlying contract that the asset is used for.
- Fixed monthly or quarterly cost with no initial capital outlay, improving the customer’s cash flow.
- Matching cash flow to the life of the asset by amortising the rentals to the value of the asset at the end of the lease.
- Offset rentals against taxable profits.
- No exposure of market changes to the residual risk.
- Removes cost and responsibility of disposal as the Lessor disposes of the asset at the end of the lease term.
Most equipment and vehicles can be financed by operating lease. Different Lessors specialise in different asset classes and Ibex Finance shall introduce the most suitable competitive Lessors for each asset class. Our expertise in operating lease enables us to negotiate the funding and the residual value taken at the end of the lease for many different assets across many industries.
A master agreement can be arranged by Ibex Finance with agreed terms and conditions between the Lessor and the customer for all future equipment or vehicles to be leased. A schedule to the master agreement is then drawn up for each requirement over a fixed term.