Operating Lease

An operating lease is a contract that allows for the use of an asset but does not convey ownership rights of the asset. Operating leases are considered a form of off-balance-sheet financing—meaning a leased asset and associated liabilities (i.e. future rent payments) are not included on a company’s balance sheet. Historically, operating leases have enabled American firms to keep billions of dollars of assets and liabilities from being recorded on their balance sheets, thereby keeping their debt-to-equity ratios low.