Operating Lease

Operating Lease

The main difference of an Operating Lease (or Contract Hire) from that of a Finance Lease is that in an Operating Lease most of the "risk and reward" is born by the Lessor contrary to that in a Finance Lease when it is the Lessee Consequently, the Lessee is not required to disclose Operating Leased Assets on their Balance Sheet

In the case of an Operating Lease the monthly rental costs would be determined by:

• The cost of the car to the Lessor
• Rates of interest to be applied
• The mileage agreed within the contract
• The Residual Value estimated by the Lessor
• The Lessor's tax position
• The amount of profit expected by the Lessor
• Inclusion of a fixed service and repair cost if the agreement is "Full Maintenance"

Depending on the terms and detail of the agreement the Lessee's responsibility could be:

• Maintenance and Repairs
• Fuel
• Accident management *
• Road Fund Licence *
• Insurance
• MOT Testing *
• Short Term Car Hire Replacement where required *

* In the case of a Full Maintenance Lease some or all of these items may be the responsibility of the Lessor.

At the end of the agreement when the car is handed back to the Lessor, the Lessee may be required to pay:

• A payment in respect for any excess mileage completed
• A payment for any damage to the car over and above "Fair Wear and Tear"

If the contract has not run the contracted period, there may also be charges in respect of early termination.

Other fleet funding options:

Finance Lease

Car Hire