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Renting is an agreement where a payment is made for the temporary use of a good, service or property owned by another person or company. The owner of the good, service or property may be referred to as the lessor and the party paying to use the property as the lessee or renter. The rental market has recently expanded to cover a diverse variety of goods and services including everything from lawnmowers and washing machines to handbags and jewellry.[1]

Contents

Reasons for renting

There are many possible reasons for renting instead of buying, for example:

  • In many jurisdictions (including India, Spain, Australia, and the United States) rent used in a trade or business is tax deductible, whereas rent on a dwelling is not tax deductible in most jurisdictions.
  • Financial inadequacy, such as renting a house when one is unable to buy it. One may not wish to pay the full price that ownership would need, allowing for smaller payments over a specified period of time.
  • Reducing financial risk due to depreciation and transaction costs, especially for real estate which might be needed only for a short amount of time.
  • When something is needed only temporarily, as in the case of a special tool, a truck or a skip.
  • When something is needed that may or may not be already owned but is not in proximity for use, such as renting an automobile or bicycle when away on a trip.
  • Needing a cheaper alternative to buying, such as renting a movie: a person is unwilling to pay the full price for a movie, so they rent it for a lesser price, but give up the chance to view it again later.
  • The renter may want to leave the burden of upkeep of the property (mowing the lawn, shoveling snow, etc.) to the owner or his agents.
  • There is no need to worry about lifespan and maintenance.
  • Renting keeps off-balance-sheet the debt that would burden the balance sheet of a company in case the property would have been bought.
  • Renting may also have positive benefits for the environment. Experts believe we may now be witnessing the beginnings of a mega shift towards the Rental Society in which the unsustainable growth in production and consumption will be reversed. The ‘disposable mentality’ will give way to efficient use and this will serve to reduce the adverse impacts on the environment.[2]

Growth of rental industry

Short-term rental of all sorts of products (excluding real estate and holiday apartments) already represents an estimated €108 billion ($160 billion) annual market in Europe and is expected to grow further as the internet makes it easier to find specific items available for rent.[3] According to a poll by YouGov, 76% of people looking to rent would go to the internet first to find what they need; rising to 88% for those aged 25–34.[4]

It has been widely reported that the financial crisis of 2007–2010 may have contributed to the rapid growth of online rental marketplaces, such as erento, as consumers are more likely to consider renting instead of buying in times of financial hardship.[5] Environmental concerns, fast depreciation of goods, and a more transient workforce also mean that consumers are increasingly searching for rentals online.[3]

Rental agreements

There is typically an implied, explicit, or written rental agreement or contract involved to specify the terms of the rental, which are regulated and managed under contract law. Examples include:

  • Renting real estate (real property) for the purpose of housing tenure (where the lessee rents a residence to live in), parking space for a vehicle(s), storage space, whole or portions of properties for business, agricultural, institutional, or government use, or other reasons.
  • When renting real estate, the person(s) or party who lives in or occupies the real estate is often called a tenant, paying rent to the owner of the property, the lessor, often called a landlord (or landlady). The real estate rented may be all or part of almost any real estate, such as an apartment, house, building, business office(s) or suite, land, farm, or merely an inside or outside space to park a vehicle, or store things all under Real estate law.
  • The rental agreement for real estate is often called a lease, and usually involves specific property rights in real property, as opposed to chattels.
  • In India , the rental income on property is taxed under the head "income from house property". A deduction of 30 % is allowed from total rent which is charged to tax.

The time use of a chattel or other so called "personal property" is covered under general contract law, but the term lease also nowadays extends to long term rental contracts of more expensive non-Real properties such as automobiles, boats, planes, office equipment and so forth. The distinction in that case is long term versus short term rentals. Some non-real properties commonly available for rent or lease are:

In various degrees, renting can involve buying services for various amounts of time, such as staying in a hotel, using a computer in an Internet cafe, or riding in a taxicab (some forms of English use the term "hiring" for this activity).

As seen from the examples, some rented goods are used on the spot, but usually they are taken along; to help guarantee that they are brought back, one or more of the following applies:

  • one shows an identity document
  • one signs a contract; any damage already present when renting may be noted down to avoid that the renter is blamed for it when the good is returned
  • one pays a damage deposit (a refundable fee that may be used in part to pay for damage caused by the renter)
  • if the customer has a credit account with the rental company, they may rent over several months (or years) and will receive a recurring or continuation invoice each rental period until they return the equipment. In this case deposits are rarely required.
  • In certain types of rental (sometimes known as operated or wet rental) the charge may be calculated by the rental charge + timesheets of operators or drivers supplied by the rental company to operate the equipment. This is particularly relevant for crane rental companies.

Sometimes the risk that the good is kept is reduced by it being a special model or having signs on it that can not easily be removed, making it obvious that it is owned by the rental company; this is especially effective for goods used in public places, but even when used at home it may help due to social control.

Persons and businesses that regularly rent goods from a particular company generally have an account with that company, which reduces the administrative procedure (transaction costs) on each occasion.

Signing out books from a library could be considered renting when there is a fee per book. However the term lending is more common.

Rent-to-own

Some merchants have rent-to-own (also called lease-purchase or hire purchase) programs, usually for expensive items such as houses or appliances. Houses however are more commonly sold using a mortgage rather than hire purchase, the difference being who the house legally belongs to during the payment period: the seller in the former case, and the buyer in the latter.

See also

References

  1. ^ "If you want it, rent it ... from a 'must have' handbag to an Aston Martin", The Observer, 2009-01-04. Retrieved on 2009-09-09.
  2. ^ "Why buy it when you can rent it?", The Observer, 2004-06-27. Retrieved on 2009-09-09.
  3. ^ a b Schenker, Jennifer. "Tough Times? Rent, Don't Buy, with Erento", BusinessWeek, 2008-08-22. Retrieved on 2009-10-01.
  4. ^ Pollok, Murray. News Highlights, International Rental News, 2009-04-01. Retrieved on 2009-09-01.
  5. ^ Moshiri, Maryam. "Is renting the new buying?", BBC Breakfast News, 2009-04-27. Retrieved on 2009-05-01.
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Simple English

Renting (also called leasing or letting ) is where someone pays money to use something for a definite amount of time. This can be anything from a car or house to a DVD.


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