Often used for low depreciating and quickly obsolescent goods such as IT and telephony, but equally useful for fleets of equipment such as cars, trucks, other wheeled goods and mining equipment. Highly attractive for the preservation of working capital and certainty of cashflow while providing use of the latest equipment.

Goods are purchased by the financier (lessor) at the request of the customer (lessee). The financier remains the legal (and taxation) owner of the goods and the lessee pays rental instalments. At the end of the lease term the customer (lessee) has 4 options:

• to hand the goods back without further obligation or cost
• offer to rent the goods for a further mutually agreed term
• make an offer to purchase the goods
• upgrade, improve, add to or replace with a new Operating Lease agreement

Useful for quick and nimble addition and contraction of fleets of equipment, Operating Lease is used by larger businesses and all levels of government bodies for the provision of any type of business equipment

• highly flexible terms of 1 to 5 years available with monthly, quarterly, half annual and annual payments
• equity (deposit) from cash or trade in may be used for upfront payments
• payments (rentals) are wholly deductible
• great for low value goods and those with low depreciation rates
• equally good for end of year tax planning

*International Financial Reporting Standard 16 (IFRS 16), effective January 1 2019, made future Operating Lease obligations reportable, whereas they had previously been treated as ‘off Balance Sheet’. It is now necessary to include the liability of future Lease payments and the corresponding underlying Asset in the Balance Sheet. The impact is simply to increase the ‘enterprise value’ of the business and bankers are well versed, so there is little real impact to lending guidelines.