An operating lease is a term contract for the use of equipment during a fixed term, with ownership option and the end of term. Product therefore does not reflect in client`s asset register.
An operating lease does not affect your balance sheet`s debt ratio, which means it has no impact on your other facilities such as over draft, production loans or bonds, it is Off Balance Sheet Funding.
Premium is calculated according a fixed rental premium, no interest rate is quoted, but due to VAT deductions and SARS deductions the nett cost on balance sheet over term is better than Prime rate.
Value of product is determined by dealership that does trade-in, full value of product belongs to the client, this is the reason ownership option is given on contract.
Creates cash-flow, opportunity cost of capital is important for any business.
VAT is payable monthly on invoice, creating a better VAT claim over term
Premiums are payable monthly or quarterly, normally in advance or arrears depending on client.
Premiums are 100% TAX DEDUCTIBLE as an Operating Expense over term, creating a better tax calculation that normal depreciation and interest claims.
Yes, settlement can be requested and will be calculated according to outstanding term.
The client pays as per normal conditions for hire purchase