Many consumers in Sri Lanka tend to assume that car renting and car leasing do the same thing or are very similar in nature. This misconception arises from the fact that renting a property and apartment leasing are essentially the same thing.
Car renting businesses exit to cater to the short-term automobile requirements especially for those who might need a particular type of vehicle for temporary use. Rented cars are owned by a rental company and are made available to you for relatively short-term use. These companies are supposed to maintain and perform services and they provide with basic insurance cover. Customers agree to not damage the vehicle, to supply fuel and to purchase additional insurance if applicable. They are required to return the vehicle within a specified time while the maintenance is handled by the renting company.
Rental rates you need to pay are determined by the car rental company based on a daily or weekly basis and include either unlimited mileage offer or a particular rate for an additional mileage that exceeds the limit. However, it’s important to note that the method by which rates are determined is not open to customers and can vary widely. There are various discount schemes available as well.
Rental companies make money by renting the same car over and over again and car renting is not a financing option as is leasing
 |
| Is 0% Finance on Used Cars Possible? Read More |
Why Leasing?
By contrast, leasing is actually a method of vehicle financing that is very similar to loan financing. A leasing company or manufacturer's finance company only gets involved after a customer decides on a lease financing. The leasing company buys the car from the dealer at the customer-negotiated price and provides it to the customer in terms of a loan. Since the leasing company has actually invested money in the vehicle, they expect to be paid interest on that money. Since all cars depreciate in value, they also want to be compensated for the reduced value of the vehicle as the customer adds miles to it and as the vehicle becomes older.
At the end of a lease period, vehicles are transferred to the lessee. Lease installments are easy to calculate using a well-defined formula. However, for car renting, there is no way for customers to calculate rental rates and it is determined on a case by case basis. A leased vehicle is usually leased only once not over and over again like a rental car.
