Car Leasing vs. Car Renting
Often when leasing is explained, most would say that renting and leasing are analogous. However it is not true; leasing and renting are two different things; here's why.
What is Car Renting?
Car rental basically answers only short term or temporary auto needs such people who are currently in a business trip or those who are in a holiday vacation.
Cars for rent are wholly owned by the rental company. The auto rental company, handles the maintenance and repair, and also carries the basic insurance. Customers, in turn, agree not to damage the car, to buy the gas, to purchase an additional insurance if necessary, and to return the car within the agreed time.
Car rental rates can vary widely since this can be based on a daily or weekly fee which can have an unlimited mileage or not (additional mileage is an additional cost). Same cars are rented over and over again unlike car leasing wherein the car needs to be disposed.
What is car leasing?
Unlike car renting, car leasing is actually another form of financing. A car leasing company only gets involved once the customer decides that he wants to finance his next car via leasing. The car leasing company then buys the car from the car dealer at the price agreed (with the client) and then loans it back to the customer which in this case is the car.
Since the lease company has invested money in the vehicle, due interests will be paid by the lessee. The leasing company also expects to be paid for the residual value of the car as the lessee makes use of it. When the lease ends, vehicles are returned to the company although the lessee has a purchase option at the end of the term.
The difference of leasing and renting
- Leasing is a form of financing and renting is not.
- Lease terms begin at 24 months while renting can be a day or two.
- A customer's credit report is important in order to acquire a lease while in renting it isn't.
- Leasing appears on your credit report just like a loan and renting doesn't. If there are any default in payments, this will appear in your credit score.
- In rental, your choice of vehicles is only available from the auto selection of the rent-a-car companies, while in leasing you can pick the car your heart desires.
- Ending the rental early is fairly easy by just returning the car. Ending a car lease, on the other hand can be pricey since there are several fees that a lessee must settle.
- Renting can come out more expensive than car leasing if the length of time is the same
