Difference Between Lease and Rent

A lease is an agreement where the lessor gives possession of its assets to the lessee for a predetermined period instead of periodic payments where maintenance is the lessee’s responsibility.  In contrast, rent is an arrangement where the asset owner or landlord transfers the possession to its tenant for periodic payments. The landlord can change the terms subsequently and generally for a short time.

On the surface, lease and rent seem similar, but there is a major difference between them.

  • When an asset is given on a lease, the maintenance responsibility lies on the lessee. When a business invests on a lease, the burden of care lies in the industry.On the other hand, when an asset is rented, the maintenance responsibility lies on the person who rents the investment or the property.

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Lease vs Rent (wallstreetmojo.com)

Without any ado, let’s get started.

Lease vs Rent Infographics

Key Differences

  • The lease is taken when a business does not have ample fixed capitalFixed CapitalFixed capital refers to the investment made by the business for acquiring long term assets. These long term assets don’t directly produce anything but help the company with long-term benefits.read more. At the same time wants to use the asset but does not want to pay for it. On the other hand, rent is taking property for a monthly fee.Leasing contracts have two parties – lessorLessorA lessor is an individual or entity that leases out an asset such as land, house or machinery to another person or organization for a certain period.read more and lessee. A 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 lessee does the servicing and maintenance when they take the  equipment on leaseEquipment On LeaseEquipment Lease is where the equipment owner allows another party to use it in exchange of periodic rentals with no transfer of ownership and has the right to cancel the lease right away in case of breach of the lease agreement.read more. In renting, on the other hand, the landlord does the servicing and maintenance even if the tenant takes the property on rent.Leasing is done for a fixed period – mostly for the medium to long term. On the other hand, renting is done for a short period, emphasizing every month.In leasing contracts, the terms and conditions are predetermined, and the contracts are made by taking mutual acceptance. However, a renting agreement can change the terms and conditions at any time.In leasingLeasingLeasing is an arrangement in which the asset’s right is transferred to another person without transferring the ownership. In simple terms, it means giving the asset on hire or rent. The person who gives the asset is “Lessor,” the person who takes the asset on rent is “Lessee.”read more, an offer of purchase is given on the expiry of the leasing contract. However, no such proposal is shown on the expiry of the renting agreement.

Lease vs Rent Comparative Table

Conclusion

Both are different, but to a layperson, they stand similar. Therefore, it is important to go deep into the concept and understand it. Even if the major difference between leasing and renting is who needs to do the maintenance and servicing, there are other differences.

And even if two parties are involved in the contract/agreement, the roles of each party are different. For example, in a leasing contract, both parties have equal rights. But in a renting agreement, the landlord has more power than the tenant though both can decide to go out of the agreement at any time.

Lease vs Rent Video

This article is a guide to Lease vs Rent. Here, we discuss the top difference between a lease and rent with infographics and a comparison table. You may also have a look at the following articles for gaining further knowledge in accounting: –

  • Lease ExtensionTypes of Ground LeaseRent Receipt TemplateCalculate Price to Rent Ratio