A finance lease is a lease that is structured to provide beneficial ownership to the lessor, so it is categorized as a capital expenditure. Basically think of making payments to own a car as a finance lease. While an operating lease allows the lessor use of the asset without beneficial ownership, so think of this as a regular lease on a car which you have to turn in after 2 or 3 years with limitations on miles driven etc. It is also classified as an operating expense with all the costs deductible in the current period vs. a finance lease with some of the costs (financing costs) deductible as well as other costs being capitalized
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