What is the difference between an operating and financial lease?
An operating lease is a short-term arrangement that can be cancelled at the option of the lessee. It is often used to finance office equipment, cars, and other assets that require periodic maintenance. Generally, the lessor is responsible for all service, as well as any insurance or property taxes on the asset. A financial lease is a long-term noncancellable contract between the lessor and lessee. It fully amortizes the lessor’s cost for equipment. Under this form of lease, service and maintenance are usually provided by the lessee.
