What's the Difference Between a Car Leasing and a Car Rental Business?

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car rental business

The vehicle rental and leasing industry contributed approximately £49 billion to the UK economy in 2018 (BVRLA). Many statistics in the sector group together car leasing and car renting, but there is a fundamental difference. Today we look at both in more detail, how they differ and their benefits.

An Introduction to Car Leasing and Car Rental

Car leasing is when someone hires a car for a reasonably long period of time and uses it regularly for personal use. Car rental is when a car is only needed for a short time period, and so there is less commitment involved.

For example, car rental would be more appropriate when on holiday or for a special occasion, while car leasing is geared towards businesses that need a large fleet of cars for their employees.

How are car leasing and car rental similar?

In both car leasing and car rental, the customer pays for the right to use a car that isnt owned by them. Both are options when an individual wants to avoid buying a vehicle and there are an abundance of companies offering both types of service. As the vehicle isnt owned by the customer, in both cases, the customer only has access to it for a limited amount of time. This time varies based on the length of the agreement.

Difference Between a Car Rental and Car Leasing Business

Whilst there are similarities, there are a number of significant differences. Well now take a more in depth look at how they are distinct. Consequently, this should show which service is best suited to an individuals needs.

Company

You usually lease cars from dealerships and rent cars from a specialist car rental business. Car dealerships will normally sell cars as well as leasing them. Car rental agencies can often be found at airports and popular tourist destinations. The dealership or rental business owns the car the entire time in both cases. However, with car leasing there is often the option to own the vehicle when the lease ends.

Car rental businesses own the vehicles for the sole purpose of renting them to generate an income. Car dealerships, however, offer leasing as an option, but it isnt the only service they provide.

Time

Building on what we mentioned earlier, timescale is one of the most obvious differences between car rental and leasing. Leasing usually lasts at least a couple of years, whereas rental tends to last a couple of days or a few weeks.

Finance

With car rental, customers usually make a one-off payment in order to use the vehicle for the chosen period of time. On the other hand, leasing is used by car dealerships as a form of finance. With this service, individuals normally pay monthly fee for a few years. If they want to own the vehicle at the end of the agreement, they can pay a lump sum to make up the cost.

Insurance

According to UK law, if you own, lease or rent a car, you must have the appropriate insurance to be able to use it on the roads. However, when leasing a car, it has to be insured under a fully comprehensive insurance policy.

Potential to Own the Car

The financial terms involved with leasing vary from when someone borrows money to buying a car outright. With a lease-to-own deal, customers can choose to stop their monthly payments and pay to own the car. It isnt possible to own a rental vehicle.

Purpose

If an individual is hesitant to commit to buying a car, leasing is a great option. At the end of the agreement, they arent forced to buy the car, but it often is an option. The monthly payments therefore essentially go towards the overall cost of buying the car.

Car rental is better for when a vehicle is needed less frequently or for a short period of time. Lets explore this in more detail below.

Why lease a car?

  • If you dont want to commit to buying a car and want to have access to some of the most competitive rates in the market.
  • Leased cars are generally a very reliable option. When you lease a car it is usually a brand new model, so you dont have to worry as much about breakdowns and faults that are more associated with older cars. Even in the worst-case scenario when something does go wrong, the fault can usually be repaired under the manufacturers warranty.
  • If you choose to lease a car, you often find you can drive a far superior vehicle. When you lease you only pay for the cars depreciation for the lease period instead of the value of the vehicle. This therefore results in lower monthly payments than other finance options. The extra cash can go towards a more expensive make or model.
  • Car leasing allows customers to take control of their monthly spend on their vehicle. When you lease, all the expenses other than insurance and fuel - are organised into one.
  • You dont have to bother with arranging a MoT. Vehicles dont need to have their annual MoT until theyve been on the road for three years. By this point, you probably wont be responsible for the vehicle anymore.

When is car rental a good idea?

  • On holiday. You can explore your holiday destination easily and cheaply. Watch out if youre under 25 though, as its sometimes pricier to rent for young people.
  • Special occasions. If youre going to prom or a wedding, you may want to upgrade your car temporarily.
  • Road trip. Its sensible to rent a car if you are going to be doing a lot of driving and your own car isnt very reliable. You are protected by the car rental agency and the mileage is put on another vehicle.

We have one car rental franchise opportunity at the moment: Green Motion. To find out more about becoming a franchisee, head to its client page today.

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