Difference Between Leasing and Renting

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

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

Next, each of them will be defined 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 leasing 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

Leasing is known as an operation very similar to renting through which an option to buy the good is acquired when the contract comes to an end. Normally a leasing contract has an established duration that goes from two to six years.

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

For companies or individuals?

In addition, 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 fairly favorable conditions in tax terms. In renting in the same way, there is the advantage of tax benefits aimed at companies or self-employed.

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 the fiscal point of view.

At the end of the leasing contract versus renting

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

The two existing options at the end of a lease 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, leasing ends up becoming a useful tool for people interested in using 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 usually higher than those of leasing or other alternatives.