Lease vs Hire purchase

 

Points of DistinctionLeasingHire Purchase
OwnershipLessor is the owner until the end of the agreementHirer has the option of purchasing the asset at the end of the agreement
DurationDone for a longer durationDone for a shorter duration
DepreciationLessor claims the depreciationHirer claims the depreciation
PaymentsRental payments are the cost of using the assetPayments include the principal amount and the effective interest for the duration of the agreement.
Tax ImpactLease rentals categorized as expenditures by the lesseeThe only interest component is categorized as expenditure by the hirer
The Extent of FinancingComplete financingPartial financing
Repairs and MaintenanceResponsibility of the lessee in the financial lease and of the lessor in the operating leaseResponsibility of the hirer

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