Renting vs. leasing

renting

Both renting and leasing are financial operations very specific that at some point or other you can sue based on your real needs. Well, they are basically characterized by being two financing alternatives that are very similar to each other, but that have some differences that you should take into account from now on. In any case, they are based on the long-term rental of a material good. For example, a vehicle, a property, material for the company or even technological equipment.

In any case, it is in the purchase of a car where these are mostly applied. financial operations. Where the renting is a contract whereby, the landlord trespass on the right to use an asset to a lessee, in exchange for the payment of rental income for a specified period. While the definition of leasing, on the contrary, is the one that refers to the system of leasing of equipment goods through a contract that provides for the purchase option by the lessee. As you have seen, they are very similar in their conceptions.

At first glance, a first difference that you can find between these two terms is the one that refers to the object of the contract. And very specifically to accounting since while renting can be consider as simply an expense, the leasing affects the liability accounts for the amount of the debt. It will be a divergence that will be very important to opt for one or the other model. And that will depend on the purpose of the operation you are going to carry out. Without being better or worse one or the other, it will depend on your real financing needs.

At the end of the contract

contract

One of the most decisive moments to differentiate both financing models is when the contract ends. Because then its true meaning will vary. But do you really know in what way? Well, as far as leasing is concerned, it will be when you return the material good acquired, such as the car, which is the most frequent case. Also when the contract is extended or simply at the precise moment in which you carry out the purchase operation of the aforementioned good.

On the contrary, in renting you have two very well defined alternatives. On the one hand, when returning the good acquired or on the contrary when the duration of the contract is extended. As you have seen, there are some small differences that can affect you for choose one or the other financing model. Although the decision you are going to make will depend on many personal and even financial variables. On the other hand, you cannot forget that renting can be more favorable in some than other situations with respect to leasing.

How long are the contracts?

Another relevant aspect is that which has to do with its expiration. Because in effect, this factor will also be decisive for you to choose one or the other. solution in your company or line of business. In this sense, the leasing contract is much more aesthetic because it requires a minimum duration of two years. Therefore, it provides greater rigidity to the operations, although in return it provides that it can be negotiated by either of the two parties.

Renting, for its part, is characterized by its mobility and flexibility so that you can adapt to each of the cash situations that you may go through from now on. Not surprisingly, it is a financing that is especially intended for the shortest term. Where there are no periods, there are no minimum periods of duration, as is the case with the financing line previously exposed. From this scenario, it can be said that they are opposing types of financing that are aimed at meeting a demand from entrepreneurs and small and medium-sized entrepreneurs. Beyond other technical considerations that on the other hand will have to be analyzed in this article.

What services do they offer?

payments

On the other hand, it is also important to take into account the service that these special lines of credit are going to offer you. Because they won't be the same for each of these models. Because in effect, renting is a contract for the rental of physical goods. And therefore it is not limited only to the purchase of cars, as many good part of users may believe. If not, on the contrary, it is an operation that is much more open to other transactions. For example, those made for the acquisition of a computer, television, musical equipment or any other need that you may have from now on.

It is no less important in the specific case of the purchase of a vehicle as it carries a wide range of services and benefits and those that the other operation we are talking about, that is, leasing, suffers from. Not in vain, if you opt for the first of them you will have a Comprehensive insurance, roadside assistance or a replacement vehicle, among some of the most relevant. Something that would not happen to you if your decision ultimately opts for leasing. Among other reasons, because all the repairs you will have to do on your own. With what in the end the expenses will be much higher than you may think from the beginning. They are small details that you should pay attention to so as not to have any other surprises with the signing of the contract.

Advantages offered by renting

Renting, on the other hand, offers you numerous advantages, such as the possibility of having assets without increasing our level of indebtedness or being a tax deductible expense for companies and the self-employed, although not for individuals. With regard to the purchase of a motor vehicle, the fact that you will not have to worry about paperwork, paying taxes and other important reasons is also appreciable. Not surprisingly, it will be the renting company itself that will take care of these administrative procedures. To the point that you may be more inclined to sign this financing operation.

Within this scenario, you should also assess other aspects such as the good you want to finance from now on. Because depending on which one you will need to sign one or the other contract and that will lead to the characteristics of the movement being completely different. Although it is true that you will have no choice but to have the structure of these two operations defined. Beyond the amount that they can reach since this is another aspect that does not affect the operation.

What does vehicle insurance cover?

insurance

Perhaps you have not stopped at this effect of this financing operation, but without a doubt you should keep it in mind from now on. Because insurance for renting fleets is intended for vehicles of any class that require a liability insurance mandatory, that is, not only cars, vans, trucks, motorcycles, etc. If not, on the contrary, they also affect industrial and professional machinery vehicles. In this sense, you cannot forget that each rental company offers different contracts with their own characteristics and coverage. Do you want to know which are some of the most common? Well, pay a little attention because you will be able to get rid of doubts from now on.

  • Insurance contracting in different modalities possible (all risk, against third parties, theft or fire, among another range of contracted policies).
  • Roadside assistance national or international, although in most cases you will need to provide a minimum mileage on your car.

In any case, it will be very important that you compare the offers they make you because there can be many differences between them. In this way, and as a consequence of its management, you will be able to save more euros than you may believe since this it is a very flexible product. To such an extent that you can mold it to your own needs as users that you are in this class of very special financial products. Although it will be of special relevance that you analyze them in the smallest detail so that you make the fewest possible mistakes.

Disadvantages of renting

On the other hand, this financing operation presents some or other damage to your personal interests and among which the following sections stand out.

  1. If in the end you generate a early termination may create a very high compensation. To the point that it could cost you a lot of money and in any case more than you expected from the beginning. In this sense, you will have no choice but to define your real needs in each moment and situation.
  2. Of course it is not an option available for all the goods that a company may need.
  3. You may not know it, but this operation requires a deposit in the bond. This movement in your capital may not be the most opportune at some point in your life.
  4. And finally, the incorporation of possible clauses of penalty due to an excessive use of the property, and that may cause you more expenses than expected.

Leave a Comment

Your email address will not be published. Required fields are marked with *

*

*

  1. Responsible for the data: Miguel Ángel Gatón
  2. Purpose of the data: Control SPAM, comment management.
  3. Legitimation: Your consent
  4. Communication of the data: The data will not be communicated to third parties except by legal obligation.
  5. Data storage: Database hosted by Occentus Networks (EU)
  6. Rights: At any time you can limit, recover and delete your information.