Operating Lease

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GAO Glossary of Terms and Definition (September 2005)

Operating Lease

An agreement conveying the right to use property for a limited time in exchange for periodic payments. Operating lease criteria are ownership of the asset remains with lessor, the lease does not contain a bargain-price purchase option, the lease term does not exceed 75 percent of the estimated economic life of the asset, the present value of the minimum lease payments over the life of the lease does not exceed 90 percent of the fair market value of the asset at the beginning of the lease term, the asset is a general purpose asset rather than being for a special purpose of the government and is not built to the unique specification of the government as lessee, and there is a private sector market for the asset. (See also Capital Lease.)

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