Hire vs Lease
Hiring and leasing are two ways a company can fulfill its requirement of equipment for a short period of time without having to invest a huge amount. In hire purchase, one pays for the price of the equipment plus the interest for the period, and this amount is divided over a period of time, while, in case of lease, one gets to use the equipment by paying regular amounts to the lessor of the equipment. There are differences in hire and lease that will be clear after reading this article.
Hire is a very common word and tells the fact that one can hire the services of another person in lieu of regular payment and retains the right to fire the person if he is not satisfies with the services of the person hired. If you are not a freelancer, you work for someone who has hired your services and you work under him. He has the right to retain you for as long as he wishes and can fire whenever he so desires.
Lease is a legal word that describes a contract between a lessor and a lessee. A lessor is the person who buys a product for the use of lessee and lessee agrees to pay a regular amount to the lessor for a specified period of time. There is no transfer of ownership rights though, at the end of the lease period, the lessee has an option to buy the asset from the lessor at a discounted price. There is both finance as well as operating leases that are commonly employed in corporate sector.
What is the difference between Hire and Lease?
• Both hire purchase and lease are used by people to make use of assets without much botheration
• While in hire purchase the hirer becomes an owner after he has made the payment of the final installment, a lessee never gets ownership rights even after the expiry of the lease term.
• There are some leases where risks and rewards are with lessor, while in case of hire purchase, maintenance of the asset is the sole responsibility of the owner of the product or asset.