Differences between leasing and renting: learn about the types of financing

Brief explanation of the concept of asset financing

Before understanding what leasing and renting are, it is important to know what asset financing is. This is a financial modality in which an individual, self-employed person or company can obtain an asset without having to pay its full cost immediately.

A financial institution lends you money to make the purchase and, for your part, you only have to make the payment in agreed installments.

In this sense, leasing works as a financing method, while renting is a form of leasing. Hence the importance of knowing their differences.

What is leasing?

Leasing  or financial leasing is a form of financing where a company or self-employed person rents one or more assets for a long period of time.

Types of leasing

Essentially, there are three types of leasing:

• Financial: when the lessee contracts the service knowing that he will purchase the asset. The duration of the contract is usually long.
• Operational: it is applied for more specific situations, with the objective of using the good, but not purchasing it.
• Electronic equipment: This is a special type that involves devices that can wear out quickly depending on their use.

Features and examples

The leasing contract should include a purchase option at the end of its validity and the lessor receives a monthly fee for the rental. It can also be noted that it offers some tax benefits.

Some common examples of assets “rented” using leasing are:

• Cars, trucks and heavy machinery.
• Office equipment such as computers, servers, etc.
• Industrial equipment, factory  spain email list machinery and specialized tools.

Definition of renting

Renting  or commercial leasing the past, the present and the future of graphic design  also works like a rental. However, the lessee only pays for the right to use the asset and does not have the option to purchase it.

Types of leasing

The rental or leasing contract only varies depending on the goods  sms To data that are intended to be used. Below are some examples:

• Vehicle leasing: includes maintenance costs, inspections and even tire changes.
• Office equipment rental: This is very common for small businesses that want to expand.
• Software rental: This includes the rental of specialized programs for different professions or financial management.

Features and examples

These contracts have a minimum duration of 12 months and a maximum of 72 months. The fees to be paid include payments for maintenance or inspections of the property. At the end of the contract, it can be extended or renewed. It is also possible to choose to return the leased property.

Cars are the most common items for which renting is most commonly used. It can also be used to obtain office supplies, computers, specialized programs and tools for particular projects, among other examples.

Main differences between leasing and renting

Now that we know what leasing and renting are, we can compare their characteristics and differences:

• Ownership of the asset: In the case of leasing, the asset initially belongs to the lessor, but when the contract ends it may belong to the lessee if he uses the purchase option. With renting, the asset will always belong to the contracted leasing company.
• Contract duration: With a leasing contract, you can have the asset for long periods of up to 10 years or more. Renting allows you to rent it for a period of between 1 and 6 years.
• Flexibility in the contract: the leasing service is the only one that offers a purchase option by paying the residual amount of the used asset. The renting contract only allows for renting.
• Maintenance and additional services: the leasing service does not include any additional services, while renting automatically offers maintenance and inspection services for the purchased asset.
• Taxation: A special feature of leasing is that the installments payable can be deducted as expenses and are not included in the payment of taxes. In renting this is not possible, unless it is used for a business activity.
• Associated costs: payment in installments is usually made every month for both cases, with the difference that the renting costs are higher due to additional services.