The main difference between a Finance Lease and an Operating Lease lies in the transfer of risks and rewards of ownership. In a Finance Lease, the lessee assumes most of the risks and rewards of ownership, even though legal ownership remains with the lessor. An Operating Lease, on the other hand, is more like a rental agreement where the lessor retains the risks and rewards of ownership.

In most cases, the lessee cannot claim capital allowances on assets under a Finance Lease. This is because the lessor, who legally owns the asset, typically claims these allowances. However, the lessee can usually deduct the lease payments as a business expense for tax purposes.

At the end of a Finance Lease, several options are typically available. The lessee may have the opportunity to continue leasing the asset at a reduced rate, purchase the asset at its residual value, or return the asset to the lessor. The specific options available will depend on the terms agreed upon at the start of the lease.

Yes, Finance Leases are suitable for both new and used assets. The age and condition of the asset will typically affect the lease terms, including the length of the lease and the payment amounts, but both new and used equipment can be financed through this method.

Upgrading equipment during a Finance Lease term can be challenging and depends on the specific terms of your lease agreement. Some lessors may allow upgrades or replacements, but this often requires renegotiating the lease terms or entering into a new agreement.

A Finance Lease typically appears on a company's balance sheet as both an asset and a liability. The leased asset is recorded as a fixed asset, while the lease obligations are recorded as a liability. This treatment reflects the economic reality that the company has effective control and use of the asset, despite not having legal ownership.

A wide range of assets can be financed through a Finance Lease, including vehicles, machinery, equipment, and sometimes even property. Common examples include manufacturing equipment, construction machinery, office equipment, and commercial vehicles.

Early termination of a Finance Lease is possible but often comes with significant costs. Most Finance Leases have early termination clauses that require the lessee to pay a substantial portion of the remaining lease payments. It's important to carefully review the lease agreement to understand the implications of early termination.

Typically, maintenance and insurance are not included in a standard Finance Lease. The lessee is usually responsible for maintaining the asset and obtaining appropriate insurance coverage. However, some lessors may offer maintenance packages or insurance options as additional services.

The residual value in a Finance Lease is typically determined at the start of the lease agreement. It's an estimate of the asset's value at the end of the lease term, based on factors such as the asset's expected useful life, anticipated wear and tear, and projected market conditions.
This value is used to calculate lease payments and may affect end-of-lease options.