Term finance and operating lease finance.

Term Finance Operating Lease Finance 1. The fixed financial cost is interest. 1. The fixed financial cost is lease rent. 2. Interest is generally cheaper than lease rental 2. This is normally higher than the cost of interest. 3. Repayment is of the loan amount plus interest at a predetermined amortization schedule 3. The repayment obligation is of lease rent 4. In case of term finance the funds can be used for any asset subject to the agreement terms. 4. The lease rentals are paid only for the specific leased asset. 5. It increases financial leverage. 5. It increases operating leverage. 6. Depreciation can be claimed on funded assets. 6. Depreciation cannot be claimed on leased assets. 7. The assets financed become the borrower's property. 7. The assets financed remain the property of lessor.