Operating Lease

An Operating Lease is set up in the same way as a Finance Lease, but the Lessee (borrower) does not take on the obligation of the Residual Value and hands the vehicle back to the Lessor (financier) at the end of the term, rather than looking for options to payout or refinance the Residual.

There is the option to include maintenance as part of the Lease Agreement within an Operating Lease. This would be referred to as a Maintained Operating Lease, or a Fully Maintained Operating Lease.

You can add costs such as annual registration, CTP and comprehensive insurance costs to be as part of your monthly instalment. Other ongoing costs such as fuel, tyres, servicing, warranties and other loan protection insurances can also be packaged into your all-in-one monthly instalment, which can present a convenient and easy to budget management cost for vehicles or fleets of vehicles.

A lot of financiers have steered away from Operating Leases due to the risk of the Residual Value not being worth the market value of the car at the end of the term, but they are still available in the market and are favoured by companies with large fleets of vehicles.