Difference Between Finance and Lease

When a company or an individual wants to buy an asset and a company has not enough money to purchase it in a one time. So at that, a company can either take choose an option to take a lease or a finance. Both this option a person can use an asset without paying the full payment.

Finance

  • Finance is an agreement in which the financial institution gives finance to buy an asset or any other property to the customer.
  • It is one type of loan agreement where a person indebted to the financial company which gives finance to buy an asset.
  • If a person takes finance, he has to pay a certain percentage of total amount of an asset, known as down payment.
  • A finance company charges interest for that so at the end of paying back the amount becomes higher than the borrowed amount.
  • A company or an entity can pay back in instalments.
  • Once you pay all instalments in a time limit, one can become an owner of an asset.
  • Finance is considered as a capital expenditure.
For example:
Finance for home, car, business, etc.

Lease

  • A lease is an agreement between two parties that is lessee and the lessor, a lessee can use and control an asset without buying it.
  • In a lease, a lessor buys an asset and give a right to use an asset for a certain period of time in return for lease rent.
  • A lease rent is paid for using the asset and this rent is an income to the lessor.
  • A lease may be a long term or for the short term depending upon the agreement.
  • Leasing is a borrowing but in leasing, you are not buying an asset but
  • The leasing entity buys on behalf of you and allows you to make use of it for a certain time limit like 5 years.
  • So a person can use that property until a contract comes to an end.
  • Leasing is considered as an operating expense.
  • At the end of the lease period, a person doesn't become an owner of an asset.
  • In a lease, a rent has to be paid on every month.
  • In a leasing, a lesser amount is used to decide the interdental interest and the left amount is called a residual. So, if a client wants to become an owner of the property he has to pay that residual amount.

Difference Between Finance and Lease

FinanceLease
Finance is an arrangement which allows a person to buy the asset without paying the entire amount in a lump sum.Lease is a financial agreement that one person buys an asset and allows the other to use it.
In finance a customer pay interest along with equally monthly instalments.In a lease, rent is paid by the lessee to the lessor.
In finance, there is a down payment.In lease, there is nothing like down payment in it.
Finance is considered as a capital expenditure.A lease is considered as an operating expense.
In finance if a customer pays the EMIs along with interest in time, a customer becomes an owner of a property.In Lease after expiry of the agreement a lessee either buy the property at a residual value or give back a property to the lessor. 

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