Rent or buy? When to choose one over the other

Open full sized image

Hefty price tag or occasional payments?

© andresr––E+/Getty Images

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.

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.

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 If the modem dies or becomes outdated, they may be able to get a newer model at no additional charge.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.

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.

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:

In many cases, buying an item still makes the most sense, particularly if:

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.