From the proud parent renting tents for a child’s graduation party to the gentleman buying office chairs to furnish the company board room, almost anything can be rented these days. The trouble is that it isn’t always easy to know when renting is a good idea. Our optimism and expectations can get in the way of making the right decision. That’s why I like to think about the situations where renting makes sense before I make a purchase.
Use is for a Short Period of Time
If you were taking a trip to Chicago for a week, would you buy or rent a car? If you said rent, it’s because you realize that your need of a car is only for the duration of the trip. We don’t always need to use things for a long period of time. In those cases, renting is the best option.
It Costs Too Much To Buy
If you can’t afford it, don’t buy it; instead, rent it!
Why do many people choose to rent a house instead of own? Purchasing a home requires a large payment of cash up-front and for many, saving up a large pile of cash is not easy. According to Bankrate.com, the average closing costs in the US are over $4,000. That’s before you include other big ticket expenses like a down payment and escrow deposit.
It doesn’t matter if your mortgage payment is the same as a rent payment. If you don’t have enough for a down payment, buying is not a possibility.
You’ll Only Need it a Few times
Similar to short periods of time, the number of times we plan on using an item has a big impact on whether or not it makes sense to rent instead of buy.
I don’t need to use a hardwood floor sander every day. I only need to refinish my floors once every few decades. Also, floor sanders are an expensive purchase. That’s why I choose to rent many of the expensive tools that I need to use infrequently.
Why These are Important to remember
Most of us are aware of the rules above and use them on a regular basis, but it is easy to misapply them.
Many people buy workout equipment with the intention of getting into shape. They know that in the long-run, buying equipment is cheaper than a gym membership. The problem is that they don’t yet posses the habits that come with working out every day without struggle. As a result, it’s common to find unused workout equipment sitting in an abandoned corner.
The would-be exerciser overestimated the use that they would get out of buying. He took a long-term orientation and assumed he’d get more use out of owning equipment.
Renting can save you money if you follow the rules and understand when you should rent instead of buy.