Glossary

Operating lease

An operating lease is essentially renting — you use the asset for part of its life, the lessor keeps the ownership risks, and you hand it back at the end. Ideal for kit that dates fast.

2 min read

Renting, not owningPart of the life

Lessor keeps riskReturn at end

Definition

An operating lease lets a business use an asset for a period shorter than its full economic life while the lessor retains the risks and rewards of ownership. The asset is returned at the end rather than owned.

In plain terms

It is a rental. Perfect for vehicles, IT and equipment that go out of date quickly — you avoid the residual-value risk and just pay for use.

Why it matters for your company

Operating leases keep flexibility high and upfront cost low, but you never build equity in the asset. Weigh it against a finance lease or hire purchase where owning matters.