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.

Funding Options Blog

Home of our blog articles on topics that will inform and educate entrepreneurs on topics such as lending, green finance, tax and financial matters.

FX & International Payments

Education

How can the Growth Guarantee Scheme support my business?

If you’ve heard of the Growth Guarantee Scheme, you might be wondering how it can help support your business. Here are some of the ways you can use it.

18 Sept 2024

Education

What is a limited company and how do you start one?

Want to find out what a limited company is and how to start one? Read this article, where we dive into starting and managing your own business.

16 Sept 2024

How does invoice finance work in the UK?

Education

What does VPP stand for on an invoice?

Have you spotted the acronym VPP on your latest invoice? Here’s what it could mean and how it may impact the delivery of any goods or services.

11 Sept 2024

Education

What is a revolving credit card?

Wondering if a revolving credit card is a good choice for your business? This blog explains what they are and how to apply for one.

9 Sept 2024

Education

How to buy a truck on finance

Find commercial truck finance. Here’s how to find and apply for financing on trucks as a limited company or sole trader. Apply today. Get a truck on finance.

4 Sept 2024

3 tips voor het voorkomen van openstaande facturen - ondernemers in overleg

Education

Should I apply for revolving or non-revolving credit as a business owner?

What’s the difference between revolving and non-revolving credit and which one is more suited to your business? Find out here.

2 Sept 2024

Education

Is a bank loan an asset or a liability?

Bank loans – are they an asset, or a liability? Find out in our latest deep dive into assets vs debt.

29 Aug 2024

Education

Are revolving credit facilities considered long term debt?

Read our latest article to find out if a revolving credit facility can (or should) be used as a form of long-term debt.

27 Aug 2024

Education

Can a new business get a credit card?

Just started your business? Find out everything you need to know about business credit cards for new companies here.

21 Aug 2024

Page

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 may 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

Funding Options Blog

How can the Growth Guarantee Scheme support my business?

What is a limited company and how do you start one?

What does VPP stand for on an invoice?

What is a revolving credit card?

How to buy a truck on finance

Should I apply for revolving or non-revolving credit as a business owner?

Is a bank loan an asset or a liability?

Are revolving credit facilities considered long term debt?

Can a new business get a credit card?

Subscribe to our newsletter today