What is an Operating Lease?

An Operating Lease is where the documents do not specify an exact purchase option at the end of the term. For example, at the end of the term, the equipment could be bought for a Fair Market Value determined by the finance company or return the equipment back to the finance company. These types of leases will have a lower monthly payment than a lease with a 10% of the purchase price or $1.00 buyout at the end of the term.

Typically at the end of the term, options for the Lessee would be do one of the following:

• • Return the equipment back to the Leasing Company (known as an Operating Lease)
  • Purchase the equipment for Fair Market Value determined by the leasing company (also known as an Operating Lease)
  • Purchase the equipment for a percentage, typically 10% of the selling price
  • Purchase the equipment for $1.00In today’s environment the majority of the leases are “Purchase the equipment for $1.00.”