Car rental or leasing

In modern realities, it is virtually impossible to imagine a business that can fully operate without the use of a vehicle. However, entrepreneurs do not always have the opportunity to purchase a car for their own needs. Many businessmen do not want to take a car on credit, as they are afraid of such cooperation with banking organizations. In this situation, a leasing or lease agreement can come to the rescue. Before renting a car, you should familiarize yourself with the difference between renting and leasing. Let's talk about this next.

Lease agreement - concept

Many people believe that car leasing and leasing are identical concepts. However, this is not entirely true, since there is a certain difference between these documents.

If we talk about a lease agreement, then this document is concluded between the head of the company and the lessor during the transfer of movable property. The terms of the agreement stipulate that the host must pay a prescribed amount of money regularly for the use of the machine. The period of such a transaction is determined individually. When the deadline comes to an end, the parties can decide to extend it. If the lessee does not want to operate the vehicle in the future, he returns it to the lessor organization.

Leasing concept

Three parties take part in the process of signing a lease agreement:

• lessee;
• leasing company;
• the seller of the car (the lessor buys the transport from him).

Usually, the agreement is concluded in a standard form. A company wishing to get transport for temporary use uses the services of a leasing organization. The latter, after agreement with the lessee, chooses a car and buys it from the seller for its subsequent transfer to the lessee.

Note that the leasing agreement may provide for the presence of other parties. These may be:

• an insurance company in which the lessee will be obliged to ensure the vehicle during the validity of the signed agreement;
• a bank that will deal with lending to a leasing organization for the purchase of a car.

The condition of this financial document implies that the lessor regularly pays a certain amount of remuneration for the use of the car, and after the completion of the contract, he receives the right to buy the vehicle at its residual value.

Similarities between leasing and renting

If we talk about the similarity of these two types of contracts, then it is worth highlighting the following factors:

• a company that takes a car for rent or leasing is obliged to pay certain money to the other party every month;
• during the term of the contract, the transport is the property of the lessor (lessor);
• both forms of relationship can be profitable;
• agreements are signed in writing. The contract is signed by all parties involved.

What is the difference between car rental and leasing?

Comparing the differences between these forms of contracts, it is worth highlighting the following features:

• some parties to the agreement. In the case of a rental, there are two parties (the company that transfers the car and the renter). There are three parties to a lease agreement;
• different terms of contracts. The lease agreement can be signed for virtually any period. At the same time, leasing documents are signed only for the useful life of the vehicle. Usually, this period is no more than 5 years;
• the fate of the vehicle used. After the expiration of the car rental agreement, the latter will need to be returned to the original owner. In a situation with a leasing agreement, the lessor will have the right to buy out the car at its residual value;
• the cost of using the car. The rental price consists of the monthly rent. Under the leasing agreement, the recipient will be obliged to pay for the rental of vehicles and cover additional costs (insurance, maintenance, etc.);
• responsibility of the parties. It is worth focusing on the fact that the lessor may impose certain penalties on the lessee for default on obligations. In the case of a rental, the accrual of any fines is unacceptable. In this case, the lessor can terminate the agreement early and collect his car.

What is more profitable?

If we talk about a more advantageous type of agreement, then everything is ambiguous here. If the company plans to purchase a car but does not have enough money for this, then leasing will be more profitable. If the company needs a car for a given period (when its transport is being repaired or the company's activities do not provide for the constant use of the car), then in this situation it is better to rent a car. A simple rental can be arranged very quickly.

Each legal entity (natural person) is obliged to decide for itself which type of agreement to give preference to. Before that, you just need to scrupulously weigh all the advantages and disadvantages of these two transaction options.