The similarity between leasing and renting vehicles is that in both cases, you pay for the right to use a car owned by someone else. However, that's largely where the similarities end. Leased and rented vehicles are very distinct financial arrangements with different types of commitments and usage expectations on the part of the driver.
A major difference between leasing and renting vehicles is the time frame of use. Leasing a vehicle is a longer-term commitment, through which you use the car as a regular vehicle for personal use. Similar to buying a car and getting a loan, you pay the lease until you want to buy the vehicle or lease another car. Rented vehicles generally have a much more narrow commitment. Some people rent for a week or two on vacation, but shorter-term rentals of one to two days are also common.
Leased vehicles typically come from car dealerships, whereas rented vehicles normally come from car rental agencies in standalone stores or at airports. The dealers that offer leased vehicles also sell cars. The lease arrangement is an alternative to a traditional financed purchase. Rental shops own vehicles solely for the purpose of renting them to others for income. Rental services come in handy when you fly for vacation or when your primary vehicle is in the shop.
Leasing a car typically involves a possibility of ownership at the end of the lease. The financial terms are just a bit different than when you borrow money to pay for the car up front. Normally referred to as a lease-to-own deal, you either elect to stop paying the lease or pay enough to own the car outright over time. Rental vehicles have no potential for ownership. You simply pay a fee to use the car for a specific period of time.
Insurance on a leased vehicle is typically required, whereas insurance on a rental vehicle is normally optional. In most states, you must carry a minimum of liability insurance on any vehicle you drive. However, dealers that lease cars usually require you to carry full coverage, which includes collision and comprehensive benefits, to protect the value of the car. Your liability typically covers your use of rental cars. However, rental dealers normally offer you the option of buying insurance for around $9 to $13 per day, according to the Federal Trade Commission, to cover damage to the vehicle while you are using it.
- Ablestock.com/AbleStock.com/Getty Images