What is rental? what is finance leasing? what are differences between rental and finance leasing?

From perspective of rules, rental is a simple transaction related to two parties and finance leasing is a comprehensive transaction related to three parties. This is substantial difference between rental and finance leasing.

Two parties of rental are the lessor and the lessee. With some hypothecated goods (resident ID card, cash pledge etc) and rent payment, the lessee takes leased equipment for his usage and returns the leased equipment taking back the hypothecated goods at the termination of rental term. For example rental for bicycle, projecting apparatus and books are usual. Item of business tax thereof is service business. Few legal issues are existent but some special leased articles.
                                       

As comprehensive transaction, finance leasing consists of two contracts (finance lease contract and purchase contract) at least and three parties (the Lessor, the Lessee, and the Supplier) involved. According to the choice of the lessee for leased article and the supplier, the lessor purchases leased article to provide the lessee for usage. At the termination of lease term, the lessee purchases the leased article in a symbolic price and the ownership of the leased article is conveyed from the lessor to the lessee. 

In China, rental company is treated as same as general firms. Neither special permission nor special supervision is required for any rental company. As to form a finance leasing company, it is required a special permission and special supervision.

Item of business tax for finance leasing is financial-insurance business. Extensive professions are related to finance leasing transaction, e.g. finance, trade, professions related to leased articles. High expertise and skills are necessary.

As to the period or term. How long the term is not the substantial difference between rental and finance leasing. Rental term is flexible from less than one day to several years, e.g. a rental term of bicycle is usually less than one day; however a rental contract of housing is usually executed every 2 or 3 years. Lease term is flexible too that the longest term reaches 5 years (less success stories for longer than 5 years) and the shortest term can not be less than 1 year. Since leased article shall became fixed asset and fixed asset must be depreciated. One year is margin for fixed asset and consumable supplies.

                            Differences between rental and lease