Difference Between Leasing And Renting

Lately there are two terms that come from English that we hear a lot, they are Leasing and Renting, two terms that have to do with rentals and that are heard a lot in the business world.

Both terms are similar to each other, since both have to do with the rental of goods such as a car. The bad thing is that many people hear these terms and don’t know exactly what they are about.

Car rental is the order of the day in companies, since not everyone can afford to pay thousands of euros for a fleet of vehicles that we are only going to use for a short period of time. In this way, car rental is a good way to save money and save taxes.

Vehicle financing is also in fashion, that is, the possibility of paying for the vehicle and other goods in comfortable installments. In this way, we will be able to pay for everything little by little, without having to make great sacrifices to pay a huge amount for a vehicle, which many people cannot do.

Therefore, the rent is always the order of the day. The bad thing about this rise is that lifelong terms such as renting with the option to buy or lending have been transformed into English-speaking terms such as Leasing or Renting.

This can be a problem for people who have little knowledge of English, since they will get lost when they hear these words and they will not know how to act when making a rental correctly. This can lead from misunderstandings to scams by sellers, taking advantage of the naivety of the buyer.

If you don’t want anyone to scam you or just want to know what these terms mean, you’re in the right place. Today we are going to explain all their differences, so that you know which one is which and do not make the mistake of choosing the one that is not, so pay close attention if you were not already doing it.

Instructions

1. Leasing: The first vehicle rental system that we are going to talk about is leasing. This word comes from English to leave and the literal translation would be something like rent with the option to buy. This option is widely used by people who want a car for a period of about two years, but do not know if they are going to continue with it after these two years have passed. Let’s see it a little more detailed.
   1. System: The leasing system, which means leaving, works as follows. We rent a car from a bank, which pays for the car and gives it to us for a period of time, which is normally two years. During this time, we will have to pay rent, but in exchange the car will be ours for those years. Once these two years have passed, we will have three options, either buy the car (discounting what has already been paid for), or renew the leasing for another two years, or leave the car and let the bank keep it, at no additional cost.
   2. Advantages: The main advantages of this system are that they allow you to have a car but not pay for it at once. Imagine, for example, that you have a company that is going to be dedicated to the transport sector and that it is going to need a fleet of trucks, for which you do not have money. Thanks to the leasing, we will be able to do the work of the truck fleet and have the trucks at a rental price, but instead, these trucks are ours for two years. If during these two years the trucks have given money, we can buy them or follow the contract, if they have not given money, we will close without losses. It also has tax advantages, since instead of being considered an asset (something that happens if the truck is ours), it is considered a liability that generates expenses, which will make us pay less taxes.
   3. Disadvantages: Although leasing is a pretty good system, it also has its disadvantages. Among the most common we have to pay everything related to the car, that is, insurance, road tax, taxes, car repairs… In addition, the vehicle is not ours, so if we have an accident, we must pay the car to the company that has lent it to us, unless we have contracted an all-risk insurance or it has been the fault of another (third-party insurance of the other covers it).
2. Renting: Now we are going to talk about renting, an activity that is more common than it seems. Renting comes from the English to rent or rent, that is, it is the conventional car rental that we all know, only this time we are going to do it long-term instead of for a few days. Let’s study it a little more in depth.
   1. System: Renting works in a similar way to leasing, that is, it gives you the car for a while, but this time it is only leaving it to you, that is, the car is not yours. Renting is long-term and does not have a purchase option, that is, when the term runs out, you must return the car to the owner, who can rent it back to you if he wants, but he does not have to.
   2. Advantages: The main advantage of leasing is savings, since by not paying insurance, circulation and maintenance costs, you will save a lot of money in the long term, paying much less than in leasing. As in leasing, renting is taxed as an expense, so it may be that you have a reduction in taxes to pay when making the income statement. In renting you are not tied to anything, but you must comply with the rental contract with the company, Being able to extend it if everything has gone well or renew it for a more modern car if you wish.
   3. Disadvantages: The main disadvantage of renting is the advantage of leasing, that is, you cannot buy the car when you finish the rental. In leasing, you lose all the money you pay, since you only pay because they let you have the car, not to buy it later. It also happens that the car is not yours, so if you damage it you will surely suffer some kind of penalty, unless it is an accident.
3. Key differences: These rental types have major differences that make them two completely different rental types. To distinguish the differences between a leasing and a renting, we are going to do the equivalent of leasing with a rental of an apartment with the option to buy and renting as a normal rental. In renting with the option to buy, what we are paying is discounted from the final price of the product, in normal renting, if we wanted to buy the product, we would pay it in full, that is, the product would not decrease in value even if it were purchased. we have rented In a rental with the option to buy, we are not interested in changing the product once the rental is over, since we will save that money that we have paid and if we change the product we will lose it. In the case of normal rental, if we change the product, nothing will happen, that is, since we are not going to earn money, we will not lose it either. Now returning to leasing and renting, you just have to know that leasing is rent with the option to buy and renting is rent only.

Tips

• Which one to choose in each case: Well, it is a very common doubt, but it is a reasonable doubt, since it is difficult to know exactly what type of rental to choose when renting a car. If your case is that you want to change your vehicle every year. If you are moving to a new vehicle, I recommend leasing, since in leasing you would lose money from the purchase option of the new car and you would pay more money. If, on the other hand, you want to set up a business that you don’t know how long it will last and you need a car, the best option is leasing, since it will allow you to pay for the car for two years and if it doesn’t work out for you, get rid of it, but if It works out for you, paying for less money. In the case of purchases from individuals, the best way to finance a car is leasing, because even if you are going to pay a little more than in a bank loan, the risk is also low. In the first place, you will only be obliged to pay for two years, since if you do not have money later, you return it and stay as you were. Secondly, you can only have the car for the years that you are going to use it, paying it only the years you need. In the case of a purchase, when you finish paying for it you have an old car that is no longer worth anything.