Rent or buy? When to choose one over the other
![A salesperson assists a couple buying a couch at a furniture store.](https://cdn.britannica.com/09/256209-050-1070CCB1/Saleswoman-assisting-a-couple-buying-a-couch-at-a-home-improvement-store-using-tablet-computer.jpg?w=385)
Paying rent used to be something limited to houses and apartments, plus the occasional car, truck, or trailer that you used on vacation or to move your stuff from point A to point B. But the rental industry has exploded with new apps and services that allow you to rent everything from parking spaces to musical instruments to electronics.
Choosing whether to buy or rent something requires careful consideration of the total cost, how you intend to use it and for how long, and whether or not you can store it. Renting may save you money, time, and the headache of owning something you don’t use often.
Key Points
- Depending on your needs, renting can make more sense than buying some consumer goods.
- It may make sense to purchase products that appreciate in value.
- Renting items such as electronics or furniture may result in hefty interest charges and fees and should be weighed carefully.
Renting vs. buying: What to consider
Before making any large purchase, consider whether it’s worth the cost. And with the rise in rental services for various items, it pays to ask yourself a few questions.
How often will you use it? If you plan on making a large purchase, you might be convinced you’ll get your money’s worth by using it often. In reality, some purchases sit in the garage or storage unit and collect dust while losing value over time.
Think twice before forking over hundreds or thousands of dollars for something that you may use only occasionally. You could save a lot of money (and maybe even time) by choosing to rent instead.
Will it lose value? Many consumer goods depreciate over time, meaning they lose their value and are not worth what you originally paid for them. In some cases, the depreciation on an item may be so steep that it may make more sense to rent instead. For example, boats are a high-cost item that can drop in value quickly after purchase. If you want to avoid depreciation, consider renting.
Am I leasing or renting?
The terms “lease” and “rent” are often used interchangeably for many items. A lease typically denotes longer periods, such as months or years, while renting may indicate an hourly, daily, or month-to-month agreement.
Is there an upgrade policy? When choosing between renting or buying an item, it’s important to know what’s in the rental agreement. In some cases, consumer electronics or items may have an upgrade policy that will allow you to get the latest model as part of the deal.
For example, many consumers rent a modem from their Internet service provider (ISP) for a nominal fee instead of paying hundreds of dollars to purchase one. If the modem dies or becomes outdated, they may be able to get a newer model at no additional charge. Plus, renting may entitle consumers to free installation and no labor charges when upgrading or replacing equipment.
Do you have space? Before purchasing a larger item, consider whether you have the space to store it. Boats, recreational vehicles, all-terrain vehicles, personal watercraft (such as Jet Skis), and other large purchases require a place to store and protect them from the elements. If you don’t have the space, it may make more sense to rent instead.
Things you can rent instead of buying
Renting consumer goods sometimes means paying more for them in the long run, but there may be practical reasons to rent some items rather than buy them.
E-bikes and scooters. Advances in battery technology have led to a proliferation of electric bikes and scooters. Shelling out thousands of dollars for an e-bike may not be practical, but renting one occasionally can be a frugal choice. Many rental companies and apps allow you to grab a scooter or e-bike for a day—or even just a few hours—and manage the rental conveniently from your smartphone or tablet.
Boats. Owning a boat can be an expensive hobby, from the purchase price to storage costs to paying for maintenance and fuel. But you can rent a boat from a private party and pay a one-time cost to enjoy some time on the water. Or you can join a boat club to enjoy the benefits of boating without the hassle of maintenance, fuel, and storage.
Recreational vehicles. It’s no secret that RVs are expensive. With purchase prices up to $200,000 (or more), plus expensive maintenance and storage costs, it can cost a pretty penny to be an RV owner. But renting an RV can save you the up-front costs of RV ownership while still enjoying the RV lifestyle. Yes, it still costs thousands of dollars to rent an RV and travel for more than a week in most cases, but it’s far less expensive than RV ownership.
Camera equipment. If you want to take high-quality photos for a wedding or when traveling but don’t want to fork out thousands of dollars for a camera and lens kit, rent them instead. Online rental sites offer expensive photography equipment and lenses for a fraction of the cost of buying them, making it cheaper to include a telephoto lens or DSLR camera in your next photo shoot or outing.
Casket. The idea of renting a final resting place may seem morbid, but renting a casket for a funeral can be a cost-effective way to have a memorial service without paying up to $10,000 to purchase a casket. Casket rental companies handle the details of delivery, setup, and pickup, and offer liners for each use. Many funeral homes also offer these services, which can cost over $1,000, but still provide savings compared to a casket purchase.
Fitness equipment. Home gyms have become a popular staple in many households, but the cost to get started can be enormous. Some home gym equipment can be rented for a low monthly fee. Companies such as Peloton offer a subscription and stationary bike rental service, allowing you to pay a one-time setup charge and a monthly fee to use the equipment.
Solar panels. Adding solar panels to your home can reduce your energy costs drastically. But solar panels are expensive, with some systems costing $20,000 or more to install. Leasing your solar panels may be a more savvy way to lower your energy costs while offsetting the monthly lease payment. Plus, panels may depreciate quickly. But leasing solar panels won’t allow you to take advantage of state and/or federal tax incentives and subsidies, so that could substantially reduce your savings.
When it makes sense to rent
Mobile apps and other technological innovations make renting a wide range of consumer goods more practical than ever. If your goal is to avoid large up-front costs, it may be more practical to rent than buy if:
- You’re short on cash. If you simply don’t have the money to purchase an item or don’t want to deplete your savings, renting may make more sense. It’s important to run the numbers, review your budget, and determine what you can afford to pay.
- You don’t have the space. If you want to purchase an item that you don’t have the space for (such as a boat), why not rent it? Even if it costs more to rent, you won’t have to find the space to store the item—plus, there’s less maintenance and upkeep on items you don’t personally own. Peace of mind may be worth the extra cost.
- You don’t want to perform maintenance. Some high-ticket purchases require more upkeep than others. Most anything with a motor requires regular maintenance, including oil changes, tune-ups, and other expenses. Renting these items can save you money by avoiding these costs.
- The asset will lose value. If the item you want to buy typically depreciates, it might make more sense to rent it. For example, Class A RVs—the largest and most expensive type—typically lose half their value in the first 10 years of ownership. Renting an RV for occasional use can be a much wiser financial move.
Rental terms matter
Be sure to read the fine print on any rental agreement. Although renting may offer a lower out-of-pocket cost each month, if your rental agreement has high fees, stiff penalties for missing payments, or inflexible terms, it may pay to shop around.
When it makes sense to buy
In many cases, buying an item still makes the most sense, particularly if:
- You have the funds. If you have saved up the funds to buy an item outright, it might make sense to purchase it. With full ownership, you can choose how and when to use the item, and there are no strings attached to your purchase.
- The ownership costs are low. If you’re planning to purchase an item that doesn’t require high maintenance costs or regular upkeep, it may be cheaper than renting in the long run.
- You’ll use the item frequently. If you plan on using an item regularly, buying it gives you unlimited access without any restrictive terms on usage. You may be better able to get your money’s worth by purchasing rather than renting an item that you’ll need often.
- You want to own an appreciating asset. If you’re looking to purchase an appreciating asset, buying makes more sense. If you choose to rent an asset that goes up in value (such as a classic car or other collectible), the owner will benefit from any increase in value, not you.
The bottom line
Before making a big purchase, it’s a good idea to run the numbers to determine whether renting or buying best fits your budget. You may determine that you won’t use the item enough to justify a high up-front cost—and find that renting it can save you money.
A word of caution: Some companies offer rent-to-own plans that may charge extremely high interest rates and fees. Review the terms carefully. In some cases, you might pay far more than the item is worth by the end of the agreement—and a high penalty may be imposed if you decide to purchase before the end of the term. If you’re sure you want to own, consider saving ahead and buying the item outright. Maybe you can rent it as needed in the meantime.
Companies and services mentioned in this article are for educational purposes only and not meant as an endorsement.