A decisive advantage of operate lease is that lessors are not required to report the leasing asset in their balance sheets. Instead, it is capitalised for tax purposes by the lessor. The leasing payments are not reported in the balance sheet and are merely included in the income and loss statement.
Lessees and lessors agree a medium to long-term basic leasing period in operate lease. Notice cannot be served to this basic leasing period; tax reasons dictate that it must lie between 40 % and 90 % of the leased asset's service life. In the vernacular, though, the term 'leasing' is simply used for operate lease. Its variations include residual value agreements or mileage agreements, whereby the latter is more common.
Operate lease factor
The leasing factor, i.e. the operate lease factor, is calculated based on the parameters relevant to leasing: discount, calculated residual value, term and interest rate. The monthly leasing payment can be calculated based on the leasing factor and the total list price of the vehicle. Operate lease rate (= leasing payment) The operate lease rate is the monthly payment made in return for the right to use the leased asset. The operate lease factor and the total list price of the vehicle are the most important quantities used to calculate the leasing payment.
Besides closed calculation, open calculation is an accounting method used in full-service leasing. Calculated on the basis of actual costs incurred, it defines a monthly service charge for the selected service components. Payments made are compared in a target-actual table at the end of the agreement; surpluses and shortfalls are then billed or credited.