Businesses who don’t have great cash flow to splash out on the expensive assets they need to run their operation can save money by renting them instead.
Asset finance is a popular way to get hold of vehicles, plant and machinery, and if your business doesn’t think they’ll ever need to actually own any of these assets, it can opt for an operating lease rather than a finance lease.
Operating leases are a low-cost type of asset finance where your business rents the assets it needs but never purchases the asset outright at the end of the contract period, like you can with finance leases for example.
Commonly, the operating lease agreement has a “residual value” that will reflect the estimated value of the asset at the point the contract will expire. It’s at this point the asset is usually sold off to a third party on behalf of the finance company.
If the asset can be sold for an amount higher than the residual value then you will receive a percentage of the surplus, but on the flipside, if the asset can only manage to be sold for an amount less than the residual value, you will be liable to pay the finance company to make the shortfall up.
One of the big advantages of an operating lease is you’ll be able to use big-ticket assets for lower monthly repayments than if you choose to buy the asset with hire purchase.
Not only are you paying less per month, but it can enable your business to get its hands on a newer vehicle fleet, or higher-quality plant and machinery than if you had to buy it all.
Another advantage is you are able to spread the cost over several years for a fixed monthly repayment that is not affected by rises in interest rates.
Not only are operating leases helpful for businesses with cash flow issues because it saves them having to outlay for assets all at once, but you also won’t need a big deposit to get one going, usually just the same amount as the first monthly repayment.
If your business needs to get hold on quality assets to do what it does best and they are assets you’ll never need to own, an operating lease could be the perfect low-cost, low-deposit option for you.
Call Perry Finance today to speak to an expert who can talk about an operating lease asset finance for your business venture.