A lease contract that provides a lessee the right to use an asset without enjoying the benefits of ownership. The lessor doesn’t transfer all the risks and rewards incidental to ownership (of the asset), and the cost of the asset is not fully amortized during the entire economic life of the asset (primary lease period). In other words, such a lease covers a period shorter than the economic life of the leased asset (with time units as short as hours, days, weeks, and months). In this sense, the lease rentals are not sufficient to allow a lessor to fully amortize the cost of assets. Under service lease, the lessor provides non-financial services including maintenance, repair and technical advice (and hence a service lease is said to be any lease other than a finance lease). The rental amount corresponds to the cost of the service provided.

Examples of assets used in service mode leases include equipment, automobiles, computers and similar devices, etc.

A service lease is also known as an operating lease.