An operating lease is a contract that allows for the use of an asset but does not convey rights of ownership of the asset. An operating lease represents an off-balance sheet financing of assets, where a leased asset and associated liabilities of future rent payments are not included on the balance sheet of a company provided that the term is under 12 months or the asset is worth less than $10,000.
- Lease rentals may be off-balance sheet for lease terms less than 12 months.
- Tax deductible repayments.
- Preserves working capital.
- End of term asset can be handed back.