What is operating lease?
Hi there,
While searching for a property be it commercial or residential property, we come across terms such as rent, lessor, lessee, lease. You may have also come across the term operating lease as well. Let me explain the term in a better and easy manner so that you can understand the operating lease meaning.
The short agreement or contract where the lessee agrees upon renting an asset from the lessor and the lessor possesses the rights as an owner on the particular assets is known as an operating lease.
In simple words, an operating lease is a type of lease where the lease agreement is signed for less than one year. During this situation, the lessor maintains the ownership of the asset that has been leased. One of the exceptional features of an operating lease is that it is cancelable, unlike other capital leases. This is the operating lease definition.
The major business leases run on an operating lease agreement because it doesn't require a large commitment. Vehicles, buildings, and equipment can be leased on the basis of the operating lease agreement.
In an operating lease, you don't get the opportunity to buy an asset, you can only rent it. For example, if a shop is rented on the basis of an operating lease system, the contract length will be around 6-12 months. The shopkeeper has to pay the rental amount to the lessor every month during the tenure. After the agreement expires, the shopkeeper needs to renew the agreement or rent another shop.
I hope you understand the operating lease meaning now.
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Authors Of The Question
What is operating lease?
Hema
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2 Year
2022-02-17T15:25:20+00:00 2022-02-18T01:18:12+00:00Comment
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