Affinity leasing’s operating lease packages will help you to reduce risks and costs associated to your business.
Another form of lease agreement is the Operating lease. Whilst these are not the most common form of lease agreement in Europe they can provide the client with a suitable alternative to the Finance Lease.
What is an Operating Lease and how does it work?
An Operating lease differs from a Finance lease since the leasing company will retain the ownership and risk associated with the asset. As such the lease company will account for the asset and amortise the asset in their accounts opposed to the clients. This allows the client to utilise “off balance sheet financing“ for their assets. Utilising off balance sheet finance may help a company with their credit scoring, since the earning v debt ratios will significantly improve.
In most instances the monthly charges relating to an Operating Lease will be lower than that of a Finance lease. This occurs since the full value of the asset is not normally recovered in the lease duration and hence the residual value of the asset we be recovered by another mechanism, for example; sale to a third party or a secondary lease to the client.
In most tax jurisdictions value added tax is calculated based on the monthly lease payment and can be reclaimed as a normal expense.
So if it’s a reduced risk financing package you’re after, our operating leasing facility could be the way forward.