3 Apr 2025

5 features of an Operating Lease

Running a small-to-medium business is no easy feat. Between balancing cash flow, managing day-to-day operations and planning for growth, it can feel like there’s no time for anything else – especially when it comes to managing your company cars.  

If you're considering options for financing your business vehicles, you might have come across the term Operating Lease. But what is it exactly, and why might it be a great solution for your business?

In this guide, we’ll break down what an Operating Lease is and walk you through 5 key features that could help your business save money, streamline admin tasks and stay flexible.

What is an Operating Lease?

It’s a lease of vehicles (or other assets) for a fixed term – typically three to five years. You return the vehicle at the end of the lease.  It can help businesses to improve cash flow and reduce admin headaches.

Operating Leases can be fully maintained, bundling costs including servicing and maintenance, registration and tyres with the lease rental into one predictable monthly payment. This flexibility makes Operating Leases ideal for businesses that want to:

• Avoid large upfront payments and fluctuations in cash flow due to unexpected vehicle costs.
• Manage fleet costs without surprises.
• Keep vehicle admin (and stress) to a minimum.

Want to know more? Check out our comprehensive guide to Fully Maintained Operating Leases.

5 key features of an Operating Lease

Here’s a closer look at what makes Operating Leases such a viable option for business owners.

No upfront costs

With an Operating Lease, you can start driving the vehicles your business needs without the hefty initial capital outlay required when purchasing outright. Instead, you’ll pay fixed monthly instalments that cover the lease rental and running costs.

This approach can free up your business’ cash flow, allowing you to focus on other  areas, like staffing, technology or marketing.

Bundled running costs

Fully Maintained Operating Leases take the guesswork out of budgeting by combining vehicle running costs with the lease rental into a single monthly payment. The bundled monthly payment can include:

• Registration and CTP insurance
• Scheduled servicing and maintenance
• Replacement tyres

By bundling these costs, many businesses find they save both time and money on managing their vehicles.

Flexibility when the lease ends

At the end of a Fully Maintained Operating Lease term, you have two options to choose from. You can:

• Return the vehicle and lease a new one (perfect for upgrading your fleet)
• Ask your leasing company to extend the lease, if the vehicle still suits your business

.This flexibility ensures you’re not locked into long-term ownership of a depreciating asset.

Tax benefits

As a business owner, you can claim a tax deduction for expenses for motor vehicles used in running your business.

Less admin hassle

Managing a fleet or even just a couple of company cars can be a logistical nightmare. Between organising servicing, renewing rego and juggling insurance claims, toll notices and fuel, the admin can quickly pile up.

Operating Leases simplify this by:

• Handling most of the paperwork for you
• Providing a consolidated monthly invoice
• Providing dedicated support from your leasing company for maintenance and fleet management queries

With less time spent on fleet admin, you can focus on the important stuff – like growing your business!

Frequently Asked Questions About Operating Leases

What’s the difference between an Operating Lease and a Finance Lease?

An Operating Lease is like renting a vehicle: you pay to use the vehicle for a set term, but ownership stays with the leasing company. 

A Finance Lease, on the other hand, is a “lease-to-own” option. You pay monthly instalments and at the end of the lease, ownership of the vehicle is transferred to you after you pay the residual amount. Running costs can also be included at your option.

Learn more

Who typically uses Operating Leases?

Operating Leases are ideal for small-to-medium businesses managing 1–20 vehicles. They’re especially useful for businesses that:

• want to avoid the financial burden of purchasing vehicles outright
• prefer predictable monthly expenses
• need to minimise the administrative tasks of fleet management

How are Operating Lease payments calculated?

Operating Lease payments are calculated based on three things:

• Vehicle type and cost: The make, model and accessories all affect the lease price.
• Lease term: Longer terms can reduce monthly payments, but shorter terms offer more flexibility for fleet upgrades.
• Estimated kilometres: Expected annual mileage influences costs, as higher usage often means increased wear and tear.

Important note: This information is general in nature and does not constitute financial or tax advice and does not take into account specific financial circumstances, situations or needs. Independent financial and tax advice should be sought.