Content: Lease Vs Rent

1. Comparison Chart

2. Definition

3. Key Differences

4. Conclusion

Comparison Chart

BASIS FOR
LEASE RENT
COMPARISON

Meaning The contract where one party permits the Renting is to let, the other party use
right to use the asset belongs to him to the your asset for a limited period and
other party for a certain period, is known as fixed consideration.
Leasing.

Accounting AS - 19 No specific Accounting Standard

Standard

Duration Long Term Short Term

Parties Lessor and Lessee Landlord and Tenant

Consideration Lease Rentals Rent

Repairs and Depends upon the type of lease Landlord

Maintenance

Modifications The terms of the contract cannot be modified The terms of the contract can be
until it ceases to exist. modified by the landlord.

Offer to buy At the end of the lease term, the lessee gets No such offer.
an offer to buy the leased asset by paying a
residual amount.

Definition of Lease:

A lease has been defined as a contractual agreement between two parties, the lessor and the lessee
whereby the lessor buys the asset and grants the lessee, the right to use the asset over a specified
period, against periodical lease rentals. Lease rentals work as a consideration for the use of the asset
that belongs to another party. The agreement in which the terms and conditions of the lease are
defined is known as Lease Deed. The different types of lease are given as under:

 Finance Lease

 Operating Lease

 Sale and Lease Back

 Direct Lease

 Open-ended lease

 Close end lease

 Single investor lease

 Leveraged lease

 Domestic Lease

 International Lease

The leasing of land, building and livestock has been very common since early centuries. Although,
the concept of leasing industrial equipment has emerged recently.

Definition of Rent

Letting the property at rent, to another person for a short term is known as Renting. The term of the
rent goes on extending, month to month until the parties mutually decide to end up the agreement.
Usually, the term of the rent is less than a year. Rental Agreement is an agreement in which the
conditions of rent are defined. The agreement may either be oral or written.

Landlord and Tenant are the two parties to renting. The landlord has the right to raise the rent or
modify the terms of the agreement, by giving prior notice to the tenant, in written form. Such an
arrangement is appropriate for the tenant when the asset is required for a limited period only as the
renting cost is high. So, the company can hire the asset on rent only when it is required.

Key Differences Between Lease and Rent

The paramount differences between lease and rent are mentioned in the given below points:

1. Leasing is defined as a contract between lessor and lessee whereby the lessor buys the asset
and lets the lessee use the asset for a particular period. Renting is to allow the other party to
occupy or use the asset for a short time, in return for a fixed payment.

2. Accounting Standard – 19 deals with leasing whereas there is no specific standard issued for
renting.

3. The time duration for leasing is long, whereas rent is for the short term.

4. There are two parties in a lease agreement, i.e. lessor and lessee. Conversely, the landlord
and tenant are the parties in case of renting.

5. The lessee pays lease rentals to the lessor while the tenant pays rent to the landlord.
 6. The expenses for repairs and maintenance is borne by the lessee when there is a finance
lease, but in the case of operating lease, such expenses are borne by the lessor. On the other
hand, the landlord bears the cost of repairs and maintenance of the asset.

7. The terms and conditions of the lease cannot be changed until it ends. As opposed to
renting, the landlord can change the terms and conditions of the rental agreement but
before giving prior notice to the tenant.

8. The rental agreement is renewed automatically, but this is not so, in the case of a lease.

9. At the end of the lease, the lessee gets the option to buy the asset at a residual price.
However, this option is not available in the case of rent.

Conclusion

The choice between leasing and renting is very difficult, but the company can decide it by analysing
the requirement of the asset. If the asset is required by the company throughout the year and so on,
then it would be better to go for lease. However, if there is no such requirement, then the company
may opt for renting.