Operating Lease
An Operating Lease (or equipment rental) is a versatile option for financing high
depreciation but short life span new technologies such as computers, and office
equipment. The finance company purchases the equipment and rents it to you for an
agreed payment schedule over a fixed term. While this is similar to a Finance Lease,
an Operating Lease has greater flexibility.
An Operating Lease provides the ability to upgrade to new technology through a simple
variation of your existing contract. This variation can be implemented during the
initial term of the agreement and you can also add in pieces of equipment and replace/upgrade
equipment. You can choose to have maintenance, software installation plus other
intangible items included in the agreement. The term of finance agreement can be
from 1 - 5 years and must follow ATO Guidelines.
Deposits are not required and the full purchase price must be financed. You must
have a residual payment as the last payment of your finance agreement according
to ATO Guidelines. This residual value is determined by the finance company and
the finance company is responsible for paying it. Be aware that the residual values
are generally not disclosed to you.
Under an Operating Lease, you have the possession and use of equipment, however,
the finance company has ownership.
At the end of the rental agreement, you have a number of options, you can:
- Return the goods to the finance company, with no responsibility for loss incurred
by the finance company in a resale
- Return the goods to the finance company and enter into another agreement for new
upgraded equipment
- Purchase the equipment at the market value (which can usually be very low due to
the high depreciation of the equipment)
- Re-rent the goods at a lower rate for a further term
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