Finance Leasing Manual - FLM1.08

Operating leasing: examples

A typical type of operating lease is one on moveable plant with the lessor taking the residual risk (for example a 3 year lease on a commercial vehicle with a life of 5 years). Other examples of operating leases include:

• the hire of tools or machinery for a few days to DIY enthusiasts

• the hire of a car for a couple of weeks

• the hire ('charter' in nautical or aeronautical language) of ships or aircraft where the agreement leaves the risks and rewards of ownership with the lessor

• ordinary leases of real property.

In all these cases one occasion of hire won't pay back the lessor's investment in the asset. The operating lessor usually has to hire the asset successively to more than one lessee, or sell the asset at the end of the lease, to make money.