Use it, then hand it back.
This is basically a rental agreement. The financier owns the equipment or vehicle and you pay a regular payment to use it. At the end of the term of the Operating Lease, simply return the item. There is no residual or balloon payment.
Advantages and applications.
With an Operating Lease you have the use of equipment, without impacting on your company’s working capital. There is also no risk to you of losing money through a greatly reduced resale value, as you do not actually own the item. An Operating Lease can also help with budgeting because you know your commitments from one month to the next. • IT Hardware & Software. • Cars, trucks and commercial vehicles. • Earthmoving and construction equipment. • Aircraft or helicopters.
When the item is first acquired, the GST is paid by the financier. As you use the equipment or vehicle, you also claim the GST on your monthly installments.