An operating lease is short-term lease used mainly for part-time usage of property or equipment. These types of leases are utilized when a company does not want the lease to appear on financial statements. It is a great way to keep the company's liabilities down. Actual ownership is not transferred in an operating lease, only the right to use the building or equipment.
Agree on inception and termination dates with the lessor.
Discuss the regular payment amount with the lessor. This is the monthly payment the company will pay.
Choose the duration of the lease. To qualify as an operating lease the term cannot exceed 75 percent of the life of the asset.
Use the calculator to find the total amount of the lease by multiplyng the monthly lease payments by the term of the lease in months. This will enable you to determine if the lease will fit within the company budget.
Draw up the lease payments and term in a contract. This legal contract ensures the lessor will receive the payments each month.
- LibertyAccounts: Operating Leases
- Board of Governors of the Federal Reserve System. "Negotiating Terms and Comparing Lease Offers." Accessed July 28, 2020.
- Federal Trade Commission. "Should I Lease a Car?" Accessed July 28, 2020.
- Experian. "State of the Automotive Finance Market," Page 22. Accessed July 28, 2020.
- Kelley Blue Book. "Q: What Is Car Depreciation?" Accessed July 28, 2020.
- Board of Governors of the Federal Reserve System. "Frequently Asked Questions." Accessed July 28, 2020.
Greg Blasso is a current student at Dowling College, looking to achieve a bachelor's degree in finance. He has worked for The UPS Store for five years and is currently the manager at one of the owner's three locations.