Out2B Company signed an 4-year lease agreement for new vehicle with LeaseCo. The leasing contract amount to $64.000. At the end of the lease term, the vehicle will revert back to the LeaseCo. The vehicle has a useful life of 5 years and has no salvage value. When signing the lease agreement, the equipment has a fair value of $67,500. An interest rate of 5% and straight-line depreciation are used.

Is this a capital or operating lease and why?