The schools’ guide to operating and finance leases

When it comes to equipping classrooms with the latest technology and facilities, most schools face the same challenge: limited capital budgets. Leasing offers a practical solution, allowing schools to spread the cost of essential equipment over time and allocate precious capital funds to other projects.

But what kind of lease is best? 

The first step is to understand the two main types of lease: operating leases and finance leases.

What’s the difference between an operating lease and a finance lease?

With an operating lease, the school effectively rents the equipment for a defined period of time, with ownership remaining with the leasing company. Whereas with a finance lease, a school pays to use equipment owned by the leasing company, but the school is given an option to take ownership of the equipment at the end of the contract by making a small payment. 

Understanding the difference between these two types is crucial for schools making equipment decisions, and for suppliers looking to help schools access the equipment they need. 

A finance lease

Think of a finance lease like buying a house with a mortgage. You make regular payments over an agreed period, and at the end, the house is yours. A finance lease works the same way with school equipment.

With a finance lease, the school commits to paying for the equipment over time (usually a number of years), and once those regular payments and any final payments are complete, the equipment belongs to the school. The payments cover the full cost of the asset, so by the end of the agreement, the school has paid for ownership.

This makes finance leases suitable for long-term infrastructure or equipment that the school intends to own and use for many years, such as canopies, toilets, LED lighting and other items with a long lifespan.

Finance leases used to require approval from the Secretary of State, as they’re classified as a form of borrowing under government financial regulations. However, recent changes to Department for Education guidance have made certain categories of equipment eligible for finance leases without requiring individual consent, including items like temporary classrooms, IT equipment, and furniture. In other words, the majority of the products we finance at Utility Rentals! That’s why UK schools and academies are automatically pre-approved for our funding.

An operating lease

An operating lease is more like renting a house. You pay regular rent to live there, but you’re not paying for ownership of the property. When your tenancy ends, you hand back the keys and move on (or negotiate a new tenancy). However, this shouldn’t be seen as an inferior option: in fact, it makes sense to structure finance this way for products with a relatively short useful life.

With an operating lease, schools rent equipment for a set period. They make regular payments to use the equipment, then at the end of the contract, the school either returns the items to the leasing company, often with the option to upgrade to newer models, or renegotiates the contract and keeps the existing equipment for longer.

This works particularly well for technology like laptops, tablets, and interactive displays that become outdated quickly. Rather than being stuck with equipment that’s no longer supported or compatible with the latest software, schools can refresh their technology regularly.

Operating leases have historically been the preferred option for UK state schools because they have never required Secretary of State approval and aren’t classified as borrowing. 

Key differences at a glance

Use this table to help decide which kind of lease type is best for your school and the equipment you need.

(Or, if you’re a supplier, go through this table with your customer to help them decide.)

Feature	Finance lease	Operating lease
Ownership at end	School given the option to own the equipment	Equipment returned to leasing company
Best for	Long-term assets the school plans to keep	Technology with shorter lifespans or where regular upgrades are beneficial
Think of it like	Buying a house with a mortgage	Renting a house
End of contract	School keeps the equipment	School returns equipment and can upgrade to newer models

Why operating leases remain popular with schools

Despite regulatory changes that have made finance leases more accessible, operating leases continue to be the preferred choice for many schools when it comes to technology and equipment with shorter useful lives.

The appeal is clear: operating leases preserve capital budgets, offer predictable payments from revenue budgets, and eliminate the risks associated with obsolescence. For items like laptops, tablets, interactive displays, and other EdTech that rapidly evolves, the ability to upgrade at the end of the contract is very attractive.

Schools also benefit from the simplicity of operating leases. Because lease payments come from revenue budgets rather than capital budgets (and because we include maintenance and support as standard), schools can plan their finances with confidence. When the contract ends, there’s no disposal headache; the equipment is simply returned and can be replaced with the latest models.

The benefits for suppliers

For suppliers of school equipment, understanding lease types opens up significant opportunities. Many schools want to purchase technology and facilities but lack the upfront capital to do so. By partnering with an experienced leasing provider like Utility Rentals, suppliers can convert their quotes into affordable subscription proposals that make it easier for schools to say yes.

With operating leases in particular, suppliers benefit from:

Larger deal sizes: Schools can afford to equip entire suites or departments at once, rather than buying in small batches year after year.

Faster payments: We’re a direct funder which means our suppliers get paid within 72 hours of project completion.

Repeat business: When operating leases come to an end, schools often upgrade to newer models, creating natural opportunities for suppliers to make additional sales.

Simplified processes: All UK state schools and colleges are pre-approved for compliant lease finance through our inclusion in the Everything ICT framework, removing lengthy approval barriers.

IFRS compliance and why it matters

One of the most important aspects of modern school leasing is compliance with International Financial Reporting Standards (IFRS). For schools, IFRS-compliant operating leases mean that lease payments come from revenue budgets rather than capital budgets. This is a game-changer for schools with limited capital funds but greater flexibility in their operational spending.

IFRS compliance also ensures transparency and proper accounting treatment, giving school leaders confidence that their financial arrangements meet regulatory requirements. For suppliers, it means they’re working with a reputable funder who understands the education sector’s unique financial landscape.

Choosing the right lease for your needs

The decision between operating and finance leases ultimately depends on the type of equipment, how long it’s needed, and what the school values most.

Finance leases make sense for:

• Long-term infrastructure or permanent facilities
• Equipment the school plans to own and use for a decade or more
• Situations where ownership is an important principle

Operating leases are ideal for:

• Technology with shorter useful lives, such as laptops, tablets, and interactive displays
• Schools that want to eliminate obsolescence risks and always have access to up-to-date equipment
• Situations where preserving capital budgets is a priority
• Schools that value flexibility and the option to upgrade regularly

For suppliers, offering both options by partnering with Utility Rentals gives schools the flexibility to choose what works best for their circumstances.

Working with Utility Rentals

At Utility Rentals, we’ve been providing specialist lease finance to UK schools for nearly 40 years. We understand the unique challenges schools face and the importance of making equipment accessible and affordable.

We offer both operating leases and finance leases, working with schools and suppliers across a comprehensive range of equipment (from iPads and laptops to furniture, outdoor play equipment, catering appliances, and bathroom equipment). Through our sister company Classroom as a Service (ClaaS), we’ve developed an innovative quoting tool that enables suppliers turn their quotes into school-friendly subscription proposals in seconds. Schools simply sign a straightforward lease agreement and gain access to the equipment they need.

Whether you’re a school looking to upgrade your technology or a supplier wanting to help more schools afford your products, understanding the difference between operating and finance leases is key. The right lease structure can transform what’s possible and turn budget constraints into opportunities to give students access to the tools they need to thrive.

For more information about how Utility Rentals can help your school or your business, get in touch with our friendly team today.

Tags

• compliant leases
• Leasing school equipment