An Operational Lease works in the same way as a Financial Lease, but allows for more flexibility in tailoring the facility to customer needs.
Because the rental amount is designed to reflect the depreciation for the asset rather than the full cost, this type of lease provides significant cashflow advantages in particular where the assets have a longer life than the lease and where the residual value is more apparent.
There can also be accounting benefits as many Operational Leases are classified by auditors as Off Balance Sheet.
Features of Operational Leasing
- legal and economical title with lessor
- amortising down to residual value
- service components may be included
- price quoted as a spread over the benchmark + fees
- annuity payment schedule
- options possible to purchase object
Benefits of leasing for your client
- availability of assets without the burden of ownership
- allows asset play
- lower payments as residual is not amortised
- includes full service at risk for lessor
- off balance sheet treatment
- fixed price, fixed tenor