Economy

Difference between leasing and renting

Leasing and renting are two terms widely used today in economics, both refer to a form of financing that is used more and more frequently. These consist of the long-term rental of goods, each of these options has well-differentiated characteristics that determine which is the best alternative at the time of rental for each person, that is, the one that best suits their needs and desires. .

In this article, we will point out the basic concepts of leasing and renting, as well as their essential differences.

Leasing

Leasing can be defined as a long-term lease of a good that can be a property, a vehicle or some technological equipment. Leasing offers the possibility of purchasing said asset at the end of the contract.

That said, leasing is a way of buying an asset through financing by a company that purchases the asset to lease it to the customer (at the customer’s request) and becomes the lessor. At the end of the contract the good is acquired by the client.

In this type of contract, the lessor assigns the rights of use of the asset to the lessee, prior compliance by both parties with certain established and well-defined obligations in the contract. At the end of the contract, the client has the option to buy the good, extend the leasing period or return it.

Additionally, leasing is a widely used strategy when it comes to buying homes or vehicles, since, on many occasions, people do not have the amount of money necessary to cover the total cost of the good they wish to acquire and although they tend to pay much more than its real value for interest and other charges, for many it is the most viable alternative for the purchase of this type of property.

Leasing

Leasing can be defined as a contract for the lease or rental of personal property, real estate, vehicles or equipment for a certain period of time. It is a way of making use of a good for which there is no purchase option.

The renting is based on the lease through a contract in which the terms and conditions are established by which the good in question will be used. That is why renting is a strategy widely used by tourism when, for example, the person wishes to use a vehicle and does not wish to acquire it through purchase, given that it will be in that place for a certain time, so rent it and agree to pay installments during the duration of the contract.

In this type of contract, the lessor assigns certain rights to the lessee who will use it in accordance with the established conditions. Leasing is a revocable contract by the client at any time, although in many cases it includes a penalty. It does not include the option to purchase or acquire the property for rent.

Once the definitions of leasing and renting have been indicated, we proceed to point out the most relevant differences between them in the following table:

Leasing Leasing
Leasing is a generally long-term rental contract. Leasing is a lease that can be short, medium or long term.
Leasing allows the purchase of the leased asset at the end of the contract. The renting does not contemplate the purchase of said good.
In leasing there are three possibilities: return of the property, purchase or extension of the contract. In renting there are two possibilities, the return of the property or the extension of the contract.
Leasing installments include payment for the use of the asset and investment payment for the purchase of the asset. The renting fees only include payment for the use of the property in question.

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