What is a finance lease?

A finance lease is a type of commercial lease in which the legal owner of the asset — in this case, a tractor — rents the asset to the user of the tractor for an agreed-upon period. When a lessee enters into this agreement, they have full operating control of the asset. They will have responsibility and assume the risks and rewards that come with owning the asset. For accounting purposes, the lease gives the lessee the same economic characteristics as if they had full ownership of the tractor. The lessee will record the asset as a fixed asset on their balance sheet. In this situation, the lessee will record the interest of the lease payment as an expense. The lesser charges rent in exchange for lending the asset. The lessor retains ownership of the asset but the lessee gains exclusive use of the asset (providing they abide by the terms of the lease). The lessee is obliged to make rental payments that cover the original cost of the asset. There is an obligation to pay all of the fixed rental amounts, sometimes including a percentage of the purchase price of the vehicle at the end of the contract.

What is an operating lease?

An operating lease in contrast is the simplest form of equipment leasing, where the customer doesn't take on the risks and rewards that come with owning the asset (such as maintenance costs). An operating lease or contract hire is a way of renting an asset for your business over a short or medium time frame without taking on any risk. With an operating lease, you can get a tractor hire over a fixed term, with lower monthly payments and without the commitment of ownership.

Zoe Cornish

Chief People & Operations Officer

Zoe Cornish is the Chief People & Operating Officer at Funding Options. Zoe has an extensive background in human resources and in developing and implementing people strategies within companies, covering employee engagement, performance management, organisational culture, coaching, as well as policies and practice. Prior to Funding Options, Zoe was the COO at Emerald group (acquired by Mind Tools).

All Blog Knowledge Pages

Blog articles

What loans are available for women to start a business?

Education

Investing in equality: What loans are available for women to start a business?

Research reveals that female-led businesses receive, on the whole, less funding than those managed by men. But why? Shouldn't industry's goal be to ensure a diverse and varied business landscape? In this article, we'll take a closer look at the problem and highlight some key finance options that every business owner can use to access finance, hopefully achieving greater gender parity.

7 Jul 2022

International Women Engineering Day 2022

Tech blog

Marija Bojcic and International Women in Engineering Day

We find out how Marija’s innate drive, and boundless curiosity led her to begin a career in Engineering.

20 Jun 2022

Education

Do I have to give my employees the day off for the extra bank holiday?

Many of us will be enjoying an extra bank holiday day off on Friday, 3 June, to mark the Queen's Platinum Jubilee. The end of May bank holiday has been moved to Thursday 2 June so that people can enjoy a four-day weekend. But is everyone entitled to the day off? It depends on your employee contract.

3 May 2022

See more blog articles

Knowledge pages

Business Loans

The top business loans for women in the UK

Female entrepreneurs are still underrepresented in the lending market, despite the many different types of funding available to women in business.

See more knowledge pages

Subscribe to our newsletter today

E-mail address

I agree to the terms and privacy policy.

Legal

Get in touch

Disclaimer: Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. We are also able to make insurance introductions. Funding Options will receive a commission or finder’s fee for effecting such finance and insurance introductions.

*Eligibility criteria apply - see Tide website for full details.

Funding Options Ltd is incorporated and registered in England and Wales with company number 07739337 and registered office at 4th Floor The Featherstone Building, 66 City Road, London, EC1Y 2AL.

© Funding Options Ltd · Authorised and Regulated by the Financial Conduct Authority · Reference Number 727867

Business Loans

Sign up to Tide today

Funding Cloud

Funding Options: Advisors

We're hiring!

Business Loans Calculator