What’s the difference between leasing and renting?
Great question. These two terms have similar meanings and are often used interchangeably as they both refer to an agreement in which one party loans an asset or property from another. However, there are a few important differences between the two.
The main difference to note is that lease agreements tend to be more ‘fixed’ and specific than rental agreements.
Rent agreements often use fairly broad terms and can be changed by either party within a set notice period. For example, if you’re renting a property for a stated period of 6 months, you can often cancel it early as long as you give one month’s notice, or by sacrificing your deposit. Similarly, your landlord may be able to change the reevaluate and modify the agreed rent payments each month.
Lease agreements, on the other hand, are typically more firm and remain the same for long periods. They also tend to be more specific and outline things such as the intended use of the property or asset, in addition to more basic information.
Accounting for leases tends to be more complex, but fortunately, IFRS 16 lease accounting software such as you can find here can help both lessors and lessees to properly manage their lease.
