Operating leases
An operating lease is a type of equipment lease where the customer (or 'lessee') rents an asset for a fraction of the item's useful life. An operating lease might also be known as business contract hire, particularly if it relates to commercial vehicles.
Why choose operating leases?
Short lease periods
Usually, operating leases include some kind of maintenance provision and they often have relatively short lease periods — meaning the lessee has more flexibility than they would with finance leases or hire purchase.
Upgrades during the term
Another indirect benefit of operating leases is that because they usually have short terms, it's possible to upgrade regularly. Some facilities even allow upgrades during the term.
Tax benefits
There can also be some tax benefits to using operating leases and business contract hire instead of another form of asset finance — for example, because instead of appearing as an asset on the balance sheet, rental payments can be offset against profits.
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What is an operating lease?
Equipment leasing
Operating leases are the simplest form of equipment leasing, where the customer doesn't take on the risks and rewards of owning the asset (such as maintenance costs).
Renting an asset
An operating lease is essentially a method of renting an asset for your business over a short or medium timeframe.
Is contract hire an operating lease?
An operating lease is a type of equipment lease where the customer (or 'lessee') rents an asset for a fraction of the item's useful life. An operating lease might also be known as business contract hire, particularly if it relates to commercial vehicles.
How much can you afford to borrow?
If you're ready to take your business to the next level, use our business loans calculator to get an idea of what you can afford.
Want to understand the cost of your loan?
Use our business loan calculator below to find out how much you can borrow to take your business to the next level.
Calculations are indicative only and intended as a guide only. The figures calculated are not a statement of the actual repayments that will be charged on any actual loan and do not constitute a loan offer.
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Financial product information
Representative example*
• 7.63% APR Representative based on a loan of £50,000 repayable over 24 months.
• Monthly repayment of £2,252.94. The total amount payable is £54,070.56
*Some lenders may apply fees during the application process, please note that these are set and provided by these entities.
Annual Percentage Rates
Rates from 2.75% APR
Repayment period
1 month to 30 years terms
Learn more about operating leases
Operating leases or finance leases?
To choose between operating leases or finance leases, there are a few things to think about:
Do you want to commit to one item long-term, or upgrade regularly?
Are you prepared to handle maintenance and repairs yourself?
Will you use the item for most of its life?
Do you want the asset to appear on your balance sheet?
Operating leases and contract hire: summary
Lease period will be shorter than the lifetime of the item.
Basically a rental agreement.
Maintenance usually handled by the lender (reduced risk of ownership).
Off balance sheet.
Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.
It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.
Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.
