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Operating Lease

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Operating lease is an agreement where the right to use an owner's asset is transferred to another person. This, in exchange for a periodic payment.

This agreement is carried out for a specific period and closely resembles the common rental. It's mainly used for technological items such as computers and other office equipment that depreciate in the medium term, for example, five years.

Differences between operating and financial leasing

One of the main differences between operating and financial leasing is that only the second one incorporates the purchase option. This, at the end of the rental period.

That is, the financial lease is characterized by transferring all rights to the rented property at the end of the contract. Such transfer occurs only if the lessee so decides.

It should also be noted that financial leasing is usually used for assets such as buildings and production machines. These depreciate less quickly than technological goods.

Advantages and disadvantages of operating leasing

Among the advantages of operating leasing, the following stand out:

- There is no continuous maintenance: The lessee isn't responsible for various expenses. For example, in the case of a car, it's up to the lessor to pay taxes and licenses.
- There is no strong disbursement at the beginning of the contract: The operating lease rarely includes a down payment, unlike the financial lease.
- Update: The operating lease allows you to renew office equipment from time to time, for example, five years. In this way, the company can remain at the forefront of technology.

Notwithstanding the foregoing, the operating lease may have some disadvantages:

- There is no purchase option: It doesn't allow to acquire the leased asset at the end of the rental period. That is, it's an expense without a minimum investment.
- It's useful only for fast depreciation assets: It's suitable for assets whose useful life is medium term. However, in the case of a home, for example, its value can be increased. Therefore, it may be more convenient to acquire a financial lease to have the option to purchase the property.

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