Rentals have expanded in recent years to a wide variety of products beyond the automotive and real estate. More and more consumers – individuals and companies – are renting technological devices, household appliances and even furniture and clothing. Transactions that are legally formalized through figures such as renting and, in the case of the self-employed and companies, also leasing -or financial leasing-. The trend reopens the eternal debate: better to rent or buy?
Numerous personal finance gurus, such as the American Dave Ramsey, assert that many consumers are mistaken in thinking that it is better to lease assets that depreciate over time, when in fact it is the “most expensive” option. A study by the Organization of Consumers and Users (OCU) on car leasing reaches a similar conclusion. According to that study, buying a car for cash or with good financing “is the cheapest” as long as the user is willing to keep it in his possession (and use it) for at least a decade. Otherwise, renting may be cheaper, although there are other aspects to take into account.
Javier Santacruz, economist and vice president of the Association of Financial Planners and Educators, argues that the choice between one option or another will depend on the type of product purchased and the use to which it will be put. For example, he maintains that leasing “makes a lot of sense” in the acquisition of a vehicle, but not in the case of a washing machine or a refrigerator, the price of which will end up amortizing quickly if it is used frequently. For this reason, he considers that the rental of this type of property must be considered “when there is no other choice.” And in the case of the private car, the purchase would continue to be the most recommended option to save, especially when buying a car with few kilometers.
However, the vehicle is the star product of leasing. In fact, the weight of this type of rental contract represented 23% of total vehicle registrations in Spain in October, according to data from the Spanish Association of Leasing and Renting (AELR). From the sector it is asserted that this formula continues to gain weight in the total market and consolidating itself as a solution for mobility.
The general secretary of AELR, Manuel García, stresses that this type of contract includes other services, such as the right to a replacement car in the event of a breakdown or its renewal from time to time. In addition, the monthly fee usually includes all-risk insurance, maintenance expenses, breakdown repair and circulation tax. Despite this, the OCU recommends comparing companies and offers, carefully calculating the kilometers to be traveled -because if they are exceeded it can be expensive-, find out if there is an option to purchase the leased property and read the contract carefully to avoid pay high penalties when you want to cancel early.
In the case of the self-employed and companies, the most recommended model for renting property is leasing, especially for those companies that want to avoid “taking their own funds, getting into debt and paying VAT in advance,” says García. He also adds that for companies “the leasing fee is fully deductible and, in addition, it gives rise to a tax credit.” To access this advantage, Santacruz qualifies that the self-employed person must be able to demonstrate that 100% of the use of the vehicle is for professional use, “and there can always be discrepancies with the Treasury, which can send a request or an inspection.”
Apart from vehicles, companies and professionals can acquire through leasing other types of goods, such as machinery, real estate and technological devices. AELR expects that new investment in leasing, which grew by 13% until September, will reach pre-pandemic figures by the end of the year, exceeding 7.8 billion euros. In this sense, the boom experienced – of 52.7% – by the leasing of personal property in the third quarter of the year compared to the same period of 2021 is noteworthy. And in the case of automotive leasing, the figures are maintained, with 205,196 operations. The rise of formulas of this type opens up the range of possibilities of choice beyond the traditional purchase.
