Although the terms may appear to have similar meanings, there is a big difference between leasing and renting a car. Both methods tend to be costly if all restrictions within the contracts are not followed, but for those who need a car for only a short time or for limited driving, these options can be cost effective. It's important to understand the differences between these two methods of obtaining a car before making your way to the dealership or rental location.
Leasing
A car lease is a long-term contract. A lease usually lasts about three years. The lessee can keep the car for the period of the lease and must return it in good condition, allowing for normal wear and tear. The lessee must pay finance charges related to the transaction and make monthly payments to the financing company.
Renting
Renting a car is a short term arrangement that lasts from a day to several months. Car rental prices are set by the rental company and depend on the date and time of the rental, the place where the car will be picked up, the type of car, the age of the driver, and the date the car is to be returned.
Costs
With regard to monthly payments, a car lease is very similar to a basic auto loan. The monthly cost depends on the type of car leased and the interest rate, but will generally be between $250 to $400 for a mid-range, intermediate car (such as a Nissan Sentra or Toyota Corolla). Renting a similarly sized car will cost about $50 to $60 per day or $100 to $200 per week. For that reason, it may be cost prohibitive to rent a car for many months. The driver would be better off seeking out a short-term lease of about six months to a year.
Choices
When you lease a car, the car is brand new (in most cases) and you have a broad choice of makes, models, styles and colors to select from. A car dealership can order a new car to lease, according to your exact requirements.
When you rent a car, you are limited to the choices that are available on the lot, and in many cases the car will already be used.
Rules
There are strict rules regarding the use of both leased and rental cars. If a leased car is not returned in an acceptable condition, the lessee may be charged an expensive lease fee. There are also bank fees, taxes, and the lessee must put a security deposit down on the car. The driver must be of legal driving age with a good credit score in order to be approved for a car lease.
Some rental car companies require a driver to be 21 or older to take a car off the lot (25 is the minimum age at some companies). The renter is responsible for covering any damages to the car, and must pay additional fees if it is not returned on time. Credit checks are not common with car rentals. The driver must simply present a valid driver's license and credit card.
More Considerations
When a car is leased, the lessee agrees to drive the car no more than a certain number of miles during the term of the agreement (usually about 12,000 to 15,000 miles per year). If the mileage limit is exceeded, the driver will be charged a fee for each mile over the limit as defined in the lease agreement. For that reason, a leased car is not an ideal choice for someone who frequently takes long road trips or commutes long distances to work. The lessee may also opt to purchase the car at the end of the lease agreement.
Some rental car arrangements come with mileage limits and restrictions on where you can drive the car. For instance, if you go outside of the state where you rented the car, or exceed a certain number of miles per day (usually about 100 to 150 miles), you may be charged a per-mile fee. While a rental cannot be purchased at the time of return, rental agencies often sell used fleet cars that they no longer need.
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