Difference between Lease and Purchase

Lease vs. Purchase

What is Difference between Lease and Purchase? Lease and purchase agreements 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.

Difference between Lease and Purchase

Lease

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

Purchase

The 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 may use the asset for consumption or lease it to another person. After completion of the payment the property is considered as a new asset for the one who has purchased it.

Regarding the form of payment, a lease is considered a non-direct payment for the total or partial property, whereas in the purchase it is considered a direct payment for the complete acquisition. In terms of costs, leasing is obviously more convenient, however you have to take into account whether the asset is one that is despised over time or not. In the case of an asset that increases its value with the passage of time, as is 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 it is most likely best to opt for the lease.

Key differences between Lease and Purchase:

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