Difference Between Lease and Purchase

Lease and purchase contracts are terms associated with conditions or degrees of ownership of an asset. Assets can be properties and in turn these can be vehicles, machinery, land, buildings, among many others. Depending on the situation and financial capacity, a person or any other entity could consider the lease or purchase of an asset.

LEASE  Difference Between Lease and Purchase

It is a condition in which a person acquires certain rights to an asset temporarily. In a lease, the two parties (lessor and lessee) agree on the terms of use and the time that the rights will be transferred to the other person or entity, as well as the payments that will be made, whether it is a single once for a certain period or on a monthly basis. This agreement is often written as an official transaction between both parties and only a part of the actual cost of the asset is paid as the rights are temporary.

PURCHASE

Purchase is a condition in which the owner assumes full ownership of an asset and pays the full cost of that asset. The new owner can use the asset for his own consumption or he can lease it to someone else. After making the payment the property is considered as a new asset for which you have bought it.

Regarding the form of payment, a lease is considered a non-direct payment for the total or partial property, while in the purchase it is considered a direct payment for the complete acquisition. In terms of costs, the lease is obviously more convenient, however it must be taken into account whether the asset is one that is depreciated over time or not. In the case of an asset that increases in value over time, as in the case of land, then it is convenient to make a direct purchase in which the total of the asset is paid for its complete acquisition, but if the asset loses value over time, then you are most likely better off leasing.

Key differences between leasing and buying:

  • In the lease, a property is only acquired temporarily, while the purchase means the total acquisition of the asset.
  • If a person or entity buys an asset, it may lease it to another.
  • In terms of costs and maintenance, the lessee is not obliged to keep the asset.

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