Skip to content
GLOSSARYTERMS AS A CREDIT DESK USES THEM

Finance lease

What is the difference between a finance lease and an operating lease?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A finance lease leaves the financier owning an asset while the business pays most of its cost over the term and pays or guarantees a residual at the end — the economics of a loan, in a lease's form. An operating lease or rental leaves the financier with both the asset and its residual value; the business pays for the use and hands the asset back. A credit desk reads both as fixed commitments beside the business's debt, whatever the accounts call them.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WORKED IN

// NEXT TO IT

All 80 terms on one page