What is an Operating Lease?
A smarter way to finance business assets.
Running a business in Australia often means investing in expensive assets (vehicles, machinery, equipment) that are essential to daily operations. But buying these big-ticket items outright can put serious pressure on your cash flow, especially if your business has seasonal income, or is just starting out.
That’s where an operating lease can be a game-changer. Instead of buying, you rent the asset for a fixed monthly cost, keeping your cash flow healthy while still getting the tools you need to grow.
What is an Operating Lease?
An operating lease is a flexible, low-cost way for businesses to access essential assets, like vans, trucks, plant, and machinery, without the financial burden of ownership. Unlike a hire purchase or chattel mortgage, you don’t own the asset. You simply lease it for a set period and return it at the end of the contract.
Operating leases are ideal for businesses that:
- Want to avoid large upfront costs
- Prefer predictable monthly expenses
- Need access to newer or more reliable equipment
- Don't want the hassle of asset disposal
How does an Operating Lease work?
Here's how it works:
- You lease the asset (e.g. van or excavator) from a finance provider.
- Monthly payments are made for the duration of the lease, usually lower than hire purchase repayments.
- The lease includes a Residual Value, which estimates the asset's worth at the end of the lease.
- At the end of the lease, the asset is sold by the financier.
- If it sells for more than the Residual Value: you may receive a refund of the surplus.
- It it sells for less: you may need to cover the shortfall.
Some operating leases also include maintenance and servicing, making it even easier to manage your business costs.
What can you lease?
Operating leases are commonly used for:
- Business Vehicles (utes, vans, trucks)
- Construction Equipment
- Manufacturing Machinery
- IT and Office Equipment
If your business relies on high-value tools or transport, an operating lease can help you stay competitive without tying up capital.
Are Operating Leases considered debt?
No. Operating leases are not classified as debt. They’re treated as operational expenses, which means they don’t impact your borrowing capacity in the same way a loan or hire purchase agreement might.
Is an Operating Lease right for your business?
If you're looking for a cost-effective, flexible way to access business assets, an operating lease could be the perfect fit. Financing new equipment or assets is a big step, and choosing the right structure can have lasting impacts on your cash flow, tax position and growth potential. Engaging RLA Finance means you're not navigating that decision alone.
We can help your business get the equipment it needs, on terms that work for you, while you get on with running your business.