What Is an Operating Lease?

By Matthew DiLallo – Updated Aug 12, 2025 at 12:24 PM EST

Key Points

Operating leases let businesses use assets like real estate or machinery without buying them.
Leasing avoids large upfront purchases and the risk of asset devaluation.
At lease end, assets must be returned, preventing any potential value gain by lessees.

An operating lease is a contract that allows a lessee to use an asset during the agreement term. Operating leases don't transfer ownership rights to the lessee. Operating leases enable businesses to rent assets with long useful life spans without incurring the capital cost needed to purchase the asset.

Here's a closer look at operating leases, how they differ from financing leases, their benefits and drawbacks, and some examples.

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Pen lying atop a lease agreement. — Image source: Getty Images

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Rent to Own

Rent-to-own homebuying combines a lease with a purchase option.

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

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