I remember when I was growing up, it seemed like in order to be successful you needed to own everything that you had. It was smart to own your home, car, clothes, etc instead of renting or leasing. That really isn’t the case anymore.
There is no one size fits all solution for when you should rent instead of buy but there are some things that you should consider before you make a big purchase to figure out which one is right for you.
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I wanted to go over several different categories of when you should consider renting over buying. By doing some math and really assessing your situation, it can save you a lot of money in the long run, as well as a lot of headache!
House and Real Estate
Before you buy a house you need to ask yourself a few questions: How long will I be living here? How much do I have in savings? Do I want to deal with the upkeep?
You need to at least be planning on living in your home for 3-4 years minimum to make buying a house the smart choice. You don’t want to deal with buying and selling a home in a couple of years when it is much easier just to find a new rental.
Plus, the closing costs, realtor fees, and moving costs will probably cancel out any profit you make on the selling of your home if you only stay for a couple of years.
You also want to be able to have enough saved up for the down payment as well as have about 3 months of your salary saved up for emergencies. There is always going to be maintenance that will need to be done on your home, it never seems to end!
You need to have enough money saved so that you don’t have to cover these maintenance fees with a credit card, you will be paying so much more in interest!
If you are ready to buy a home, I wrote a post on what I wish I knew before I bought my first house that may give you some more insight into what all is involved.
Leasing a car can be great because you don’t have to put a lot of money down up front but make sure you do the math before you sign that contract.
When you take into account the monthly payment, the down payment, title, dealer fees, and taxes, you could end up paying the majority of the cost of a car for one that you will have to return in two years!
If you actually want a new car every few years and you don’t like dealing with the maintenance, then leasing a car may be what is right for you.
If you are looking to save money, buying a used car is your best bet. Since most cars drop in value the most in the first four years, look for a car that was made four years ago.
Take good care of it to keep it running for at least five years and you will see a good return on your money if you decide to sell it.
I don’t know about you but I don’t go to a lot of parties or weddings where I will wear formal or cocktail attire. For expensive clothes that you are only going to wear once or twice, rent instead of buy!
I love using Rent the Runway for dresses for office parties, weddings, events, etc. I can get a $600 formal gown for less than $80 to use for the week. They also offer jewelry and handbags for rent as well.
It is good to buy investment pieces that you know you will actually wear though. To find out if a purchase is worth it, take the total cost of the item and divide it by the times you are going to wear it. Take that number and subtract from the purchase price.
If the number is greater than 65% of the price, than it is probably worth buying. Also check out my post for how to get designer brands on a small budget.
Tools and Equipment
I’m not a big DIY person and my husband isn’t really handy so we have the basic tools that every home needs. When we need something for a big job, we will usually rent it.
Another good option before you even rent is to check with your neighbors, some may be happy to let you borrow any big equipment that they may have. You can also check sites like Nextdoor to post your requests.
If you only need something for one or two projects a year, try to schedule to do the projects around the same time to get the most use out of the equipment you will be renting.
For us we usually rent a pressure washer, carpet cleaner, maybe a saw, etc.
The same goes for any outdoor gear. If you only go camping once a year, you may want to rent a tent instead of buying one. Same goes for skis, paddle boards, kayaks, etc.
This will help you save both money and storage in the long run.
These are just a few examples of when it is smarter to rent instead of buy. I hope this helps you decide what is worth your money and what you can get cheaper just by renting.