Operating leasing is a short-term lease agreement where the agreement period is shorter than the economic life of the Leasing Object. The purpose of this leasing is to use the object of leasing for some temporary use and for that reason it is for a short term. In this type of leasing, the object of leasing is transferred for a certain period of use to the user, but at the end of the contract it is returned to its owner

Characteristics

The leased vehicle is not registered in the company's balance sheets, i.e. the vehicle is not shown as property in the lessee's accounting books
This way of financing provides a clear overview and control of the costs of each vehicle (the lease can include the costs of insurance, servicing, tire replacement)
When concluding a lease agreement, comprehensive insurance is mandatory.
The user of the vehicle is treated as the lessee of the vehicle.
In the balance sheet, the lease is not recorded as an asset and a liability. In the income statement, the entire rent is recorded as a material cost. In this way, it consciously affects the reduction of the profit from the operation, which entails reduced obligations on the basis of taxes.
After the expiration of the lease agreement, the vehicle does not become the property of the lessee.
According to the needs of the tenant, the mileage is agreed, which is limited. After the lease expires, the Tenant pays for each additional kilometer of the agreed upon.

Advantages

• Cost transparency
• Vehicles are not recorded as fixed assets
• Rent is recorded as an expense
• Profit tax is reduced
• Less committed funds - more liquidity
• Ability to use multiple vehicles