Differences between leasing and renting and the advantages they offer

Jul 22, 2021 | Employee Expenses

Both concepts are novel. Both are also Anglicisms that sound more and more common to us, due to their growing popularity. And both are mainly associated with the automotive sector, although they are beginning to be used in other industries and markets as well. We are talking about leasing and renting. What are they really about? Why are they becoming a financial solution for companies and individuals? And, above all, What are the differences between leasing and renting? Let's answer all the doubts and unknowns in these lines.

Leasing and renting: defining the two concepts

Let's start with the basics: defining each of the concepts. Leasing and renting are two terms that usually go hand in hand and are mostly linked to the vehicle rental and use sector, both by individuals and companies. by both individuals and companies. The fact is that, due to their interesting characteristics, they are now also being introduced in other sectors.

However, as we indicated in the previous paragraph, renting and leasing are not the same thing, renting and leasing are not the same thing. On the one hand, renting (from the verb "to rent" in English) is precisely a rental in which the lessee enjoys the use of an asset for an agreed period of time, without having the right to acquire it at the end of that period. Leasing, on the other hand, is a rental of a good that offers in the contract the possibility for the lessee to keep the good at the end of the agreed period.

In other words, leasing and renting are two financial models for leasing goods. However, the main difference between leasing and renting is that leasing offers a right to buy, the main difference between leasing and renting is that leasing offers a right to purchase at the end of the contract, while renting does not. at the conclusion of the contract, whereas leasing does not. It should also be noted that, in both financial models, the goods being marketed are new and that both have found in the vehicle sector a real ecosystem in which to grow and gain popularity.

Benefits of renting and leasing

"Pay a fee of x euros per month and enjoy the new model of x brand for the next x years". This is the increasingly common advertising message of the vast majority of car brands. At the same time, if we stop to read the small print of such advertisements, we see that they include higher prices in the last instalment. The reason is that these are leasing deals, in which, at the end of the term, the possibility is offered to keep the car in ownership by paying the last instalment.

Televisions, billboards, website banners, radio spots... These examples can be found in any space. And the fact is that both leasing and renting, especially the latter if we are talking about companies, have become a very attractive financial model for brands and lessees. Why? Because they offer benefits and advantages such as these: 

  • Short terms. Leasing or renting contracts do not usually last much longer than 5 years and at least 2 years in total.
  • They do not require very high initial investments. You only pay monthly instalments as if you were paying for a monthly service.
  • Different possibilities at the conclusion of the contract. It is common to find leasing where the brand (especially in the automotive world), at the end of the leasing period, will rental offers: 
    • To retain ownership of the property by paying a remaining amount. 
    • Return it at the end of the agreement. 
    • Replace it with a newer, more up-to-date model, paying for the change, of course. 
  • It offers tax advantages, as expenses can be deducted for the public finances to which we are accountable.

At the same time, another of the advantages that these models generally offer is that the monthly payments, whether we are individuals or companies, usually include associated costs such as registration, taxes, insurance or maintenance, usually include associated costs such as registration, taxes, insurance and maintenance. Expenses that, as you know, are not always taken into account when calculating the cost of buying a vehicle and that, in the long run, end up inflating the price ostensibly.

Which is better: leasing or renting or buying outright?

Now, we come to the difficult question of what is the best solution: Is a financing model like this better for me or is it better to buy the property outright? And another: which is better: leasing or renting? It depends. 

In the case of companies, although remote working is becoming increasingly popular, there are still many companies that have to spend large budgets on, for example, transport. For them, cost savings in these areas are essential, cost savings in these areas are essential, and leasing or renting are perfect for this. They allow you to enjoy up-to-date, modern vehicles as if they were your own, for a much lower initial outlay than buying a car, motorbike or van.

In fact, in this line, if you have to decide between leasing and renting as a company, leasing may even be more interesting. By not offering the final purchase option, many companies start a new leasing contract with the same or another brand. And what are the advantages of this?

  1. To have a modern and up-to-date fleet of vehicles in terms of functionalities and in terms of functionality and technology.
  2. Showing a fresh, modern and up-to-date brand image to the company using these recent models.
  3. Offer yourself in an attractive way also to your own employees and to future job applicants within the organisation. for jobs within the organisation.

On the other hand, workers spend less and less time in their jobs, so the fact that the terms of renting and leasing are around 5 years is more in line with the temporal reality of the relationship between company and worker. And lastly, the economic control that allows monthly payments means that for many financial managers it is much easier for many CFOs to keep track of their accounts.

Even so, leasing, which was originally leasing, which was originally conceived for the self-employed and small businesses, can nowadays also be attractive for all types of companies, can nowadays also be attractive for all types of companies. However, it does offer the employee the possibility of keeping the vehicle at the end of the agreement at his or her own expense. It should also be noted that, as is the case with all leasing models, not all leasing arrangements are tax deductible for certain tax advantages mentioned above.

Ideal models for employee cost control

It is true that, at the individual level, the culture of owning goods is losing weight in favour of reusable and/or immediate consumption services and products. services and products that are reusable and/or for immediate consumption. The best example of this is the success of streaming platformsstreaming platforms, food delivery applications, apps for buying and selling second-hand objects, etcetera. Even so, when it comes to high-cost products (cars or houses, for example), many still prefer to buy from the outset and have that wealth.

easyap's value proposition

At easyap we have been helping our clients to improve and save money in their invoicing and accounting processes for more than 20 years.
We provide our clients with a solution adaptable to any sector of activity, such as renting and leasing, where we have evolved our service to cover all the casuistry, actors and relevant information for the sector:
  • Issuing and receiving invoices to customers and suppliers.
  • Adapted data model: registration number, chassis number, driver...
  • Association of vehicles on each invoice.
  • Fleet vehicle status
  • Checking of relevant documentation against invoices (orders, contracts, etc.).

So the answer to whether it is better to buy outright or rent or lease is up to each individual and their lifestyle and consumption. What we do want to point out from easyap is that these financing models are of great help to certain companies. Companies, for example, where there are a lot of business expenses linked to transport. As these are paid in monthly instalments, it allows the financial managers to account for all employee expenses much better. all employee expenses much better. And if these managers use optimised services such as easyap's, everything becomes even simpler, faster and more secure.

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