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Finance type

Operating Lease

Rental-style finance — you pay to use the asset for a fixed term and hand it back at the end. Common for fleet vehicles and IT, often bundled with maintenance.

See if it fits my business

Quick answer

An operating lease is a rental arrangement where your business pays to use an asset for a fixed term without taking on ownership. The lender carries the residual-value risk — at the end of the term you simply hand the asset back. Lease payments are typically a full operating expense for tax purposes. Operating leases are popular for company vehicle fleets, IT hardware, and other assets where the business prefers predictable cost and refresh cycles over ownership.

Who it suits

  • You want predictable monthly cost with no end-of-term residual risk
  • You refresh assets every 2–4 years (fleet vehicles, IT)
  • You want maintenance and servicing bundled in
  • You do not want the asset on your balance sheet for management reporting

Pros

  • · Off balance sheet in some accounting treatments (subject to IFRS 16)
  • · Lease payments are typically fully deductible operating expense
  • · Residual-value risk sits with the lender, not you
  • · Maintenance, servicing, tyres and registration often bundled (fully maintained operating lease)
  • · Hand the asset back at end — no resale hassle

Cons

  • · You never own the asset
  • · Early termination fees can be material
  • · Mileage / utilisation limits apply — overage charges if exceeded
  • · Fair wear and tear charges may apply at hand-back
  • · Total cost over a long horizon can exceed buying outright

At a glance

Ownership during termLender
Ownership at end of termLender — you hand it back
Balance sheet treatmentOn balance sheet under IFRS 16; operating expense pre-IFRS 16
Who claims depreciationLender
Who claims tax deductionYou — full lease payment is deductible
GST treatmentGST on each lease payment
Typical term24–48 months
DepositTypically $0
End-of-termReturn the asset (or re-lease)
MaintenanceOften bundled (fully maintained operating lease)
Mileage / utilisationCapped — overage charged per km / hour

Operating-lease pricing depends heavily on assumed residual value, term, expected utilisation, and whether maintenance is included. All offers subject to lender credit approval.

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Related finance options

Finance lease

Lender owns but you take on the economic risks — option to purchase at residual.

Hire purchase

You own the asset at the end. Better if ownership matters.

Frequently asked questions

You pay a fixed monthly amount to use the asset for an agreed term (typically 24–48 months). At the end of the term you simply return the asset to the lender — they take the residual-value risk. Operating leases are commonly used for fleet vehicles, IT hardware, and any asset where the business prefers refresh cycles over ownership.