Ever since my husband and I got married a little over a year ago, we’ve been debating whether or not to buy a house. His pro-purchase argument: We’re essentially pouring our paychecks down the drain by renting, whereas if we put the same amount of cash toward buying a home we’d be building equity at the same time. My take: His job is the only thing keeping us in our small town; if anything happened to it, we’d have to relocate.
We’ve had countless dinnertime conversations where he’ll try to win me over with real estate porn from Trulia (he knows I’m a sucker for open-plan kitchens and yards with a pond). But I’ve realized that the question of whether to rent or buy doesn’t just apply to houses. It actually comes up on a regular basis these days for everything from accessories to athletic equipment — and it’s often a tough call.
Struggling with the great buy or rent debate? Here’s your guide to what you should buy and what you’re better off renting.
Buy: A Car
Look, a shiny new car! No down payment! Low monthly fees! No matter how attractive leasing sounds, buying a car will always be better for your bank account in the long run. “At the end of a lease, you have nothing, whereas at the end of a financing plan, you have a tangible asset,” says Jack Gillis, director of public affairs for the Consumer Federation of America and author of “The Car Book.” Gillis says, “And remember that when you lease, you’re still responsible for insurance payments and maintaining the vehicle according to the dealer’s requirements.” Plus, there’s often sticker shock when your lease is up and you’re docked with fees for surpassing the mileage limit or excess wear and tear.
Rent: Athletic Equipment
Even though renting pricy sports gear like skis or a paddleboard isn’t exactly a bargain, it’s usually a better deal than buying outright. For one thing, if you’re a beginner, you’ll often use different equipment than someone with more experience and might find yourself needing an upgrade a couple of years down the line. Size is another factor, adds Susie Stewart, a manager at Sports Chalet, which offers a wide variety of gear for rent or purchase. Even if you kayak every summer, do you really want to store a boat in your garage all year then lug it around, or pay extra airline fees to fly your snowboard to Vail?
That said, if you do the sport frequently enough to offset the purchase price and the gear will hold up over the years (a tent will last you a decade, but five-year-old skis can feel ancient), buying is the way to go, according to Stewart.
If you know which model you want and you’ll use it on a regular basis, purchasing electronics is significantly less expensive than renting. For example, a rent-to-own iPad 4 from Presta, an electronics rental site, will cost nearly $1,200 over the course of a year ($23 a week, to be exact), whereas buying it outright is just $450.
One caveat: If you’re torn between an LCD versus plasma TV, or you’re wondering if a 42-inch screen will be too big for your living room, consider renting for a month to figure out if it’s a good fit, suggests Michael H. Anderson, PhD, professor of finance at the University of Massachusetts Dartmouth, who has researched the rent-to-own market. It’ll still cost more, but because they’ll deliver and set it up for you, renting can save you the hassle of buying something you’ll later return.
Buy: A Dress
As long as it’s a versatile piece with staying power that you’ll rock at least once a year, buying a new dress gets you more bang for your buck. “Renting will still cost you a chunk of cash, and you only wear it once,” says Connie Wang, senior global editor at Refinery29. Leasing a dress costs roughly between $40 and $450 from Rent the Runway (which offers the biggest and best selection of jaw-dropping party frocks out there) — so if you attend five dressy events a year, your total bill could be in the thousands.
The only time it might be worth it to splurge on a rental? “If you’re looking for something blockbuster and on-trend for a once-in-a-lifetime occasion, like a red carpet event or your sister’s black-tie wedding to a prince in a French castle,” says Wang.
A classic handbag or necklace that never goes out of style will last you for years, so it’s wise to invest in a quality piece. Craving a trendy extra that you’ll probably be over next season (think:a punk choker or embellished belt)? Snag it for cheap from a store like Forever 21 or H&M.
The only time you might want to rent: “When you’re on the fence about purchasing a big-budget staple, you could lease it first to help you decide,” says Wang. “If you don’t feel total separation anxiety when you return it, you’ll know it wasn’t for you.” Check out Bag Borrow or Steal, where you can rent a Goyard tote or Chanel watch by the month for a fraction of the retail price.
If you’re going to use that reclaimed barn wood dining table or art-deco sofa for at least a year, then buying is definitely the way to go. “If you rent furniture that you later purchase, your payments will end up costing about two to three times the retail price,” says Anderson.
Leasing is only a viable financial option if you’re not certain you’ll need the item down the line — say, you’re considering setting up a wet bar in the basement but want to make sure you’ll actually use it, or you’re temporarily relocating to another city. CORT and AFR offer stylish, mid-priced rentals that are a serious step up from Rent-a-Center.
Rent: A Vacation Home
Not only do second homes incur the same mortgage and maintenance fees as your primary residence, but they also usually require a hefty down payment (about 20 percent). “A vacation home is a discretionary purchase — something you should only buy once you’ve established a financially secure lifestyle and are maxing your savings and retirement accounts,” says Jane Hodges, author of “Rent vs. Own.”
“Even if you intend to rent it out to travelers, I wouldn’t go into it considering it an investment. It’s more like an expensive toy with an income stream.” Luckily, sites like VRBO, HomeAway, and AirBnB, make it easy to find great vacation rentals practically anywhere these days.
The tricky thing about navigating the art market is that there’s a veil of secrecy regarding value and a slew of hidden costs (framing, shipping, insurance, installation, etc.). “Still, if you’re looking to make a long-term investment, buying is ultimately a better deal than renting,” says Alex Tryon, co-founder and CEO of Artsicle, an online platform for leasing and purchasing artwork.
But to get a decent price, you have to be a savvy shopper: To save the most, buy from the artist directly and cut out the middle man (e.g. a gallery). Look for open studio events or reach out to artists you admire and ask if you can stop by to check out what they’re working on.
If the artwork you’re passionate about is beyond your budget, Tryon suggests telling the artist how much you love his, or her, work and asking whether there’s anything they’d be willing to part with for a hundred dollars in cash. And a payment plan is a viable option: Offer to put 20 percent down, and then pay off the rest in monthly installments.
Leasing might make sense if you’re an art commitment-phobe — say, you’re trying to figure out what you really like or what would look good in your space. “We get a lot of young couples who are negotiating their budget and figuring out each other’s taste, but whose ultimate goal is to find a piece they love,” says Tryon. You can rent artwork from Artsicle for $25 to $65 a month, depending on size, and should you choose to buy the piece, they’ll put 50 percent of what you spent on the rental towards the total.
It’s a Toss Up: A Home
Ah, the great debate of renting or owning your home. The upside of owning: You can lock in a set monthly payment for the next 15 to 30 years rather than submit to the volatility of changing annual rents, and you can build equity with each payment. So buying makes sense if you’re settled and don’t envision your lifestyle changing dramatically over the next five years. Your credit score also plays a role in determining whether home ownership makes sense: To get the best advertised mortgage rates, it needs to be at least 760. “Factor in whether your score is so low that it’s not worth buying now, or if it’s high enough to get a decent rate,” says Hodges.
If your credit score is low, if you’re in debt, or if there are potential changes that could affect your income on the horizon (e.g., having a kid, going back to school, switching careers), it may be smarter to rent. “Look at your near-term inflection points,” urges Hodges. Unless you can promise yourself that you’ll be in the house for at least five years, the cost might outweigh the benefit. Aside from shelling out a down payment and monthly mortgage payments, homeowners spend about 3 percent of the purchase price per year on maintenance — so a $200,000 home will cost roughly $6,000 annually in upkeep. Should you need to move, keep in mind that selling incurs steep exit costs (renovations, taxes, realtor fee), which lower your total profit. And while finding a tenant is an option, you’ll still have the mortgage to pay off.