Difference between Lease vs Buy
What would you do when you’re confused between lease or buy.
Leasing gives you an option of immediately owning the asset without putting in too much money.
Buying, on the other hand, allows you to have ownership of the asset.
Let’s understand the difference between Lease vs Buy.
Leasing will allow you an option to immediately get hold of the asset you want to use without paying a hefty amount. It’s like buying a phone. And for leasing, you would pay lesser money for the asset per month than if you would have bought the asset. In leasing, you would receive another benefit. You would also be able to save taxes (depending on the place you’re located at).
Buying will allow you to own the asset. If you take a loan from the bank, a bank will own the asset until the amount is paid off. But for buying an asset, you need to pay more per month than if you would have leased the asset. Buying an asset also allows you to pay less insurance premium than leasing an asset.
So, what would you do?
It depends on the need you have as of now.
If you feel that you need to use the asset for a limited period (i.e. 3 months to 6 months, or even a year), you should go for leasing. Leasing will allow you to pay less, use the asset as long as you would like, and then you can return the asset to the respective owner. Leasing will allow you not to get involved in long-term loan payment and you will be able to save a lot of time and effort.
On the other hand, if you feel the asset has a long-term value to you and you may use it for your business for an indefinite period of time, buying would be the ideal situation. You would be able to own the asset immediately and whenever you will pay off the loan, it would be completely yours. Plus, you would also need to pay less insurance premium.
Head to head Comparisons between Lease vs Buy ( Infographics)
Below is the Top 7 Comparisons between Lease vs Buy
Key differences between Lease vs Buy
Both Lease vs Buy are popular choices in the market; let us discuss some of the major Differences Between Lease vs Buy :
- Leasing allows you to pay less and get all the benefits of buying (most of). Buying allows you to take the ownership but at a hefty cost.
- Leasing doesn’t need any down payment (or need a lower down payment). Buying needs 10-20% of immediate down payment.
- When you lease, you need to pay less amount per month as an amount for leasing the asset. When you buy, you need to pay a handsome amount to the bank before you pay off the entire amount of the loan.
- Leasing is best when you need the asset for a limited time. Buying is best when you feel you want to own an asset for long-term.
Lease vs Buy Comparison table
The main differences between Lease vs Buy are as follows –
|The Basis Of comparison between Lease vs Buy||Leasing||Buying|
|Meaning||Leasing allows you to use the asset immediately without paying a hefty amount upfront.||Buying allows you to own the asset not only for immediate need but also for a long-term purpose.|
|Amount per month||Usually lower.||Usually higher.|
|The matter of selling||Once your lease is over, you don’t need to worry about selling the asset. You simply return the asset to the dealer.||If you don’t like the asset after the purchase, you need to find a new buyer to sell off the asset.|
|Tax savings||In leasing, you would be able to save more taxes.||In buying, you would be able to save fewer taxes (there can be an exception).|
|Insurance premium||You need to pay more insurance premium in the case of leasing.||You need to pay less insurance premium in the case of leasing.|
|Down payment||Downpayment in terms of leasing is quite low. In advertised leases, there’s nothing due to getting the lease (meaning no down payment).||You need to pay a down payment of 10%-20% of the asset immediately.|
|Long-term Loan||There’s no question of a long-term loan.||In a normal scenario, you need to take a long-term loan from the bank/financial institution.|
Conclusion – Lease vs Buy
Lease vs Buy have both merits and demerits. The ideal way to approach this is to understand your requirement first.
Not everyone will need to buy an asset immediately. As a business, if you’re just starting out, you can take an asset on lease in the beginning since it would cost you less. Once you expand your business and think that owning an asset will serve you more than the cost, you can go ahead and buy the asset.
This has a been a guide to the top differences between Lease vs Buy. Here we also discuss the Lease vs Buy key differences with infographics and comparison table. You may also have a look at the following articles –