Operating Leases Explained
Operating lease process is highly effective for vehicles and assets of high value. It helps Lessor the build of residual value by reducing the rentals. This is how operating lease benefits for cash flow and leveraging funding that is off the balance sheet.
Salient Features And Other Benefits
- Customer is exempted by the residual risk as it is born either by the third party or the finance house
- You can set the rentals to match your cash flow
- It is highly advantageous for businesses that are seasonal
- Rentals can be counterbalanced against tax benefits
- Assets are normally dealt as off the yearly balance sheets (subjected to approval from your auditor)
What Is Typically Counted As Assets
All Commercial vehicles, cars, machinery & plants, coaches, buses and any other asset that Lombard supports as apt residual value count as asset.
Frequently Asked Questions
Q1. Can operating lease be handled off the balance sheets?
Yes of course but is completely subjected to approval from your auditor. You can classify the lease as an off the yearly balance sheet entity.
Q2. Will I be able to claim some tax allowances?
As an owner, Lessor can claim suitable writing down allowances to be reflected in your rentals. You may also offset the rental against taxable profits that is normally observed over the period you agree for depreciation policy. If you are unsure about this, you may take advice from your auditors.
Q3. Will I Be Able to claim VAT that is charged over the rentals?
If you are registered for VAT, you will be able to claim VAT that is payable over the rentals of commercial vehicles.
Q4. Who will be responsible for required repair and servicing?
You will be responsible for all the required repair and services if it is not included in your agreement. You will have to maintain the asset in good condition. In case you get additional parts or replace any part, it gets into the property of finance house.
Q5. What will happen when agreement ends?
It completely depends on the kind of operating lease you owe. You can consult us before your period of hire ends and we will be pleased to discuss and explore suitable and applicable options for you.