Corporate Finance Tutorials
- Debt Capital
- Debt vs Equity
- Short Term Financing
- Long Term Financing
- Bridge Loan
- Surety Bond
- Asset Financing
- Loan Syndication
- Types of Credit Facilities
- External Sources of Finance
- Letter of Credit (LC)
- Line of Credit
- What is Money Market?
- Callable Bonds
- Mezzanine Financing
- Subprime Loans
- Leveraged Finance
- Microfinance Loan
- Stocks vs Bonds
- Loan to Value Ratio – LTV
- Loans vs Advances
- Lending vs Borrowing
- What is LIBOR?
- Marginal Cost of Capital
- Imputed Interest
- Cost of Refinancing
- Balloon Payments
- Mortgage Banker vs Broker
- Mortgagee vs Mortgagor
- Best Money Market Books
- Cost Center Vs Profit Center
- Economic Order Quantity Eoq
- Buying Vs Leasing
- Mortgage Vs Hypothecation
- Lease Vs Rent
- Deficit vs Debt
- Internal Reconstruction Vs External Reconstruction
- Secured vs Unsecured Credit Card
- Short Sale vs Foreclosure
- Loan Shark
Lease vs Rent Differences
Lease and Rent aren’t same. On the surface Lease and Rent seem similar, but there is a major difference between two of them.
- When an asset is given on a lease; the responsibility of maintenance lies on the lessee. That means when a business takes an asset on a lease, the responsibility of maintenance lies in the business.
- On the other hand, when an asset is rented; the responsibility of maintenance lies on the person who rents the asset or the property.
In this article, we will go through a comparative analysis of Lease and Rent.
4.9 (1,067 ratings)
Without any ado, let’s get started.
Lease vs Rent Infographics
Even on the surface it seems that renting and leasing are similar; they’re not. In this section, we will look at the differences between lease vs rent –
Lease vs Rent – Key differences
There are many differences between lease vs rent. Here are the key differences that stand out
- Lease is taken when a business doesn’t have ample fixed capital, and at the same time wants to use the asset but doesn’t want to pay for it. Rent on the other hand is taking a property for a monthly fee.
- Leasing contracts have two parties – lessor and lessee. Rental agreement has two parties as well – landlord and tenant.
- Leasing is usually done for assets/equipment. Renting is mostly done for properties or lands.
- In leasing, the servicing and maintenance are done by the lessee when s/he takes the equipment on lease. In renting, on the other hand, the servicing and maintenance are done by the landlord even if the tenant takes the property on rent.
- Leasing is done for a fixed period of time – mostly for medium to long term. Renting is done for a short period of time and the emphasis is on every month.
- In leasing contracts, the terms and conditions are predetermined and the contracts are made by taking mutual acceptance. In renting agreement, the terms and conditions can be changed anytime.
- In leasing, an offer of purchase is given on the expiry of leasing contract. There’s no such offer given on the expiry of renting agreement.
Lease vs Rent (Comparison Table)
|Basis for Differences between Lease vs Rent||Lease||Rent|
|1. Meaning||Lease is entering into a contract with the lessee for a long period to use an asset/property.||Rent is entering into an agreement with the tenant for a certain period to use an asset/property.|
|2. Term||Usually leasing contract is signed for long term.||Rental agreement is signed for short term.|
|3. Accounting standards||Leasing contracts are based on accounting standard 19 (AS-19).||There’s no particular accounting standard that is followed in renting agreement.|
|4. Parties||Lessor and lessee.||Landlord and tenant.|
|5. Consideration considered||The monthly installments are paid for the lease.||A rent is paid monthly/quarterly for using the property/asset.|
|6. Maintenance||In leasing, the responsibility of maintenance of the asset lies on the lessee.||In renting, the responsibility of maintenance of the asset lies on the tenant.|
|7. Change in contract/agreement||Once the contract is signed, there’s no change in the contract for the fixed period of time.||The landlord can change the agreement anytime s/he chooses.|
|8. Offer at expiry||Once the term is over, the lessee is asked to purchase the asset/property.||There is no such offer given to the tenant by the landlord.|
Lease and Rent both are different, but to a layman, they stand similar. That’s why it is important to go deep into Lease and Rent concept and understand. Even if the major difference between leasing and renting is who needs to do the maintenance and servicing, there are other differences too.
And even if two parties are involved in the contract/agreement, the roles of each party are different. For example, in leasing contract, both parties have equal rights. But in renting agreement, the landlord has more power than the tenant though both can decide to go out of agreement whenever they want.
Lease vs Rent Video
This has a been a guide to the top differences between Lease vs Rent. Here we also discuss the Rent and Lease differences with examples, infographics, and comparison table. You may also have a look at the following articles for gaining further knowledge in Accounting –
- Accounting in Operating Lease | Definition
- Bid vs Ask – Top Best Differences
- What is Fixed Capital?
- Finance vs Lease Differences
- Capital Lease vs Operating Lease
- Financial Lease vs Operating Lease
- Operating Leverage vs Financial leverage Differences
- Mortgage vs Hypothecation
- Mortgage APR vs Interest Rate
- What is Hypothecation?