email usOperating Lease
The lease will not run for the full life of the asset, and the lessee will not be liable for its full value. The lessor or the original manufacturer or supplier will assume the residual risk. This type of lease will normally only be used when the asset has a probable resale value; for instance aircraft or vehicles.
The most common form of operating lease is known as "contract hire". Essentially, this gains the customer the use of the asset together with added services. A very common example of an asset on contract hire would be a fleet of vehicles.
Residual Values
A residual value is the value of the asset at the end of the lease term. Residual values play an important role in an operating lease that is used in conjunction with equipment that retains value at the end of the contract period. The residual value will be left out of the rental calculation. Either the leasing company or a third party will take the risk that the asset will not be worth the amount of the residual value at the end of the lease.
Balloon Rentals
Under a balloon rental, payments are made over the period of the lease. Sometimes a larger payment or lump sum called a "balloon payment" is made at the beginning or end of the lease period. Often the customer would pay a balloon payment on the last day of their lease.
