Net Operating Lease

 

In exchange for a lease payment, the customer has control of the asset. The customer is responsible for all maintenance associated with the asset. The lease payment for the customer is treated as an ordinary expense. The lessor maintains ownership of the asset.

Lessee gives the Lessor payment at the beginning of the month for that month's rent.

Pros

  • Fixed payment amount
  • Least trouble administratively
  • Railroads give rate discounts for supplying own equipment if zero rated

Cons

  • Can be more expensive
  • Money changes hands earlier
  • Must manage fleet more interactively