Difference between leasing and renting

comparisons

We are going to see the difference between leasing and renting, which are two similar financing options that are increasingly common but have some differences. In the first place, both consist of the long-term rental of an asset, which is usually a vehicle, a property or technological equipment.

Both leasing and renting are only offered for new goods and have a series of their own and important characteristics when choosing between the two options.

Each of them will be defined below, indicating their basic differences. On the other hand, as the most common market in this type of contract is that of automobiles, vehicles will be addressed as an example in the explanations.

Difference between leasing and renting

The main difference between renting and leasing is that renting can be used as a resource by ordinary individuals or individuals and not only by companies or freelancers.

The other important difference between both models is that renting does not allow the possibility of acquisition at the end of the contract, that is, the owner will not be able to become the owner of the asset as it happens in leasing.

Rental contracts

It is known as leasing to an operation very similar to rent by which an option is acquired to buy the good when the contract comes to an end. Normally a leasing contract has an established duration that ranges from two to six years.

As for renting, there is also another long-term rental modality in which, in addition to the corresponding monthly installments, other concepts such as registration taxes, circulation taxes, related insurance or the usual maintenance and assistance services are included. The duration of this type of operation usually ranges between one and five years.

For companies or individuals?

In addition, the leasing can only be executed in operations related to goods that can be used in an economic activity by a company or a self-employed person. Thanks to the use of leasing, a large number of companies have the ability to obtain financing for a car with quite favorable conditions in tax terms. In renting in the same way, there is the advantage of tax benefits aimed at companies or freelancers.

But in addition, in renting, unlike leasing, it is a tool that individuals can also use, although individuals do not obtain this type of favorable conditions from a fiscal point of view.

At the end of the leasing contract versus renting

With the termination of the leasing agreement, the owner can choose to carry out the purchase of the vehicle through the payment of the residual value stated in the contract. If you do not choose this option, you could request an extension or extension of the contract by negotiating new installments or change vehicles and start a new contract.

The two existing options at the end of a renting are the extension or renewal of the contract under the same conditions and a new car or the return of the vehicle. For this reason, renting ends up becoming a useful tool for people interested in the use of new vehicles from time to time and without having to worry about issues such as repairs or insurance.

Leasing and renting costs

Due to the inclusion of these expenses within the installments, the payments related to a leasing contract are generally higher than those of leasing or other alternatives.

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