Rent or Buy?
Posted by Gail | Filed under Smart Shopper
Sometimes buying is the only way to go: think tooth-brushes and underwear. But for just about everything else, there’s a rental option that could let you try before you buy. So when does it make sense to rent?
Everyone knows renting a movie is about 20% of the cost of buying the same DVD. Hey, you can watch 5 great flicks for about the same cost as buying one. So does the same thing apply to other stuff? Sure it does. And there are times when renting definitely has the advantage.
If you’re not sure your new acquisition will be fit you well then it may make sense to take a trial run. Sure that convertible looks really cute on you? But where will you put the suitcase or the cat-carrier? Better to try it on for a few weeks to see what the downsides may be. Ditto that expensive camera or sports equipment. How about that new gaming console?
My girlfriend, Jazz, decided against buying a car after we had the rent versus own chat. Turns out that since Jazz lives in the city and can get around just fine on transit, she’s way better off renting when she needs a car for longer jaunts. It’s also far more cost-effective for beginner skiers to initially rent equipment. It gives you a chance to hone your skills without brutalizing your own gear. And after you’ve mastered the basics, you can “try-on” more expensive gear to get a real feel for different lengths, styles and makes. When you go to buy your own stuff it’ll be an informed decision.
If you’re likely to use your new acquisition only a couple of times, then renting makes more sense than owning. Think power-washers, carpet steam-cleaners, camping gear, and myriad tools and equipment. That treadmill sitting under all those clothes might also fall into this category, even if that wasn’t your intent. And that time-share you bought… well, maybe it wasn’t the deal you though it would be.
And then there are those special occasions when you want to live large but your wallet doesn’t have what it takes. Rather than buying on credit, you could rent that designer dress. Hey, if you want to tool around in a vintage car with the top down and you’ve got the daily rate, make your dream come true.
Before you decide if renting or buying makes more sense, do the math. Figure out what the item’s cost per use will be before you bring it home permanently. Sure, that steam cleaner is on sale, but if you only use it two or three times it was no bargain. Before you whip out your credit card, divide the purchase cost of the item by the number of times that you expect to use it in a given time period. ?Knowing an item’s cost per use will help you to see whether renting or buying is the better financial move.
There are some things you should avoid renting. If you’re planning to rent-to-own, you’re likely going to end up paying double or triple the cost. So when I’m talking about “renting” is for temporary use, not a way to have everything you can’t wait to get your sticky little fingers on.
Sometimes it’s tough to find a place to rent, or shipping costs are prohibitive so renting locally is the only way to go. If you’re determined to have that jukebox for your honey’s 50th birthday bash, you may have to shop hard to find what you’re looking for. But you may be surprised at what’s available and how much less expensive it can be.
When it comes to renting, make sure you know the rules before you put down your money. Does the price you’ve been quoted include everything? Very often set-up costs are separate. Find out what happens if the item you’re renting is damaged while in your possession. Insurance may be offered to offset your liability, but if it isn’t, see if your credit card company offers rental insurance or if it will be covered under your home policy. If you’re trying on with the intent to possibly buy, see if you can buy the item at a discount once you’ve rented. And if you’re done with your rental sooner than you expected to be, can you get a refund on your rental fee?
September 19, 2011 at 6:41 am
Talk about timing. Literally moments before I checked out this post I said to my husband that there are, unusually, two houses for lease in a place we would possibly like to buy. This area has the most phenomenal water views but is close to a long stretch of railway and a main road so could be too noisy.
It would be terrible to sell our place, then buy a block of land and build there only to find out it really is too noisy.
He wasn’t too keen on the idea of packing all our stuff up for a rental, though…
September 19, 2011 at 6:51 am
Tool or equipment rental would be another good example.
September 19, 2011 at 7:18 am
I had used the Bissell Little Green carpet spot cleaner one place where I worked so when my daughter plopped green paint all over my carpet, I called Santa Claus and asked for an advance on my Christmas present so I could go out and buy one. The carpet is immaculate again.
Then my friend complained about her stained couch and I offered to lend it to her in exchange for a dozen of her fabulous cupcakes. Her couch is now immaculate, and sadly for my cupcake fix, she was so impressed that she went out and bought one of her own.
That came in very handy for her because the next day some great aunt gave her an old storage ottoman that was covered in stains. She cleaned it up and it looks brand new. So these items were sort of impulse buys but we did try them out first.
September 19, 2011 at 7:39 am
Along similiar lines, (perhaps Amelia could’ve done this) you can chip in and buy something together. A few friends with ATV’s chipped in and bought an ATV hoist collectively. Price was under $100,but we all only ever need it once a year. Now the only problem is who’s garage it gets parked in for the rest of the year.
September 19, 2011 at 8:18 am
Renting vs owning doesn’t just apply to obvious things: a lot of people in Ontario for some reason rent their water heater (usually for about $15/month) for about 15 years without thinking about it; they could buy one and have it installed for $1000.
September 19, 2011 at 8:25 am
Someone tried very hard once to sell us what was essentially a timeshare in a series of resorts using the argument “why rent when you can own?” After listening carefully and asking a bunch of questions, it became obvious that you couldn’t do much with the timeshare except go to the same set of five resorts year after year, which would basically eat up our vacation budget and our available vacation time. We like to see new places and while the resorts were lovely, simply renting a hotel room or cottage in the places we want to go allows us the flexibility to experience new places. I think they knew they’d lost a sale when we finally responded with “why own when you can rent?”
September 19, 2011 at 8:29 am
@Geoff – Yes, we rent our water heater because we live in a very high iron area and they rust out fast! We’ve already replaced our water heater three times in 10 years – and the contractor removes and installs a new water heater within the rental price. If we were to buy one, we would have to do all the work ourselves or hire someone, plus the cost of the heater – as you said, possibly $1000 per shot. It is much more economical for us to rent here.
September 19, 2011 at 9:06 am
I guess the only thing I rent is the modem on my internet, which is about $4. I don’t mind that too much. However, my communications bill is starting to creep up again (grr!) so I’m considering downgrading my services to keep things under control. I always end up paying more than I want to pay.
Good post Amelia – I’ll recommend the Bissell cleaner to my mom. My mom lives in the boonies so it might be good to buy a cleaner. She has only a couple of neighbours though.
I don’t rent movies. I only like seeing a movie once anyway. I usually get my movies from the library and occasionally watch movies online .
September 19, 2011 at 9:45 am
This is definitely good advice. Another great thing to do if you don’t plan on using something a lot is to see if you can rent it or borrow it from a neighbour or friend.
I know a guy who is willing to help people with anything and gets to know his neighbours really well but also isn’t afraid to ask them to borrow anything he might need. He’s borrowed all kinds of tools and equipment from them and saved himself a bunch of money in the process. That way everybody’s happy!
September 19, 2011 at 10:37 am
@ Brenda – there are always exceptions, it’s true
I wonder though how your contractor possibly makes money presuming he’s buying them new and collecting only 3.3 years of rent. It would be like buying a car for $20K and collecting $10K in rent before having to buy another $20K car.
September 19, 2011 at 11:21 am
I’d guess contractors are buying water heaters at about $100-$200. The cost is the installation, not the heater itself. And at probalby $30-$40/month rental fees, payback is pretty quick.
Water heater rental is something we’ve looked at. The payback is there to buy your own, probably in about 3 years. But we decided to stay renting, more just for the ‘insurance’ aspect of it, i.e. not worrying about repairs. With the rental, the gas company comes out and fixes it same day, and we’ve had them out probably a half dozen times in the last 10-15 years; all at no cost.
My brother in law however bought his and has been happy with the savings.
September 19, 2011 at 1:34 pm
@ InsureCan – I can’t imagine it’s that cheap. HD sells them for about $900 and that’s a smaller one. I don’t think even buying in bulk gets them down to that kind of pricing. But I guess its possible.
I guess everyone’s mileage varies. I’ve never had to call the gas company out but see your point. But it’s not ‘no cost’ – its covered by your rental fees.
I remember when I called in to cancel my rental and buy out my heater that the lady said it’s all covered if something goes wrong. But then I thought – well I don’t rent my car, or my fridge, or my furnace, or my shingles, etc all of which could benefit from the same sort of coverage.
When I bought ours out 2 years ago, I was paying $12.99+gst a month. I paid $30+gst to buy it out. So that’s 24 x $12.99 + gst (I’m leaving hst out as I don’t know when that kicked in) = $333 – $32 = $331 savings. IF I get another 2 years out of my water heater that’ll save me another $333 (it’s 17 years old, so we’re getting in the code yellow stage). Even if just’s a year, I’m coming out way ahead by owning.
There is a certain element of calculated risk involved though that can’t be ignored. I may be out of hot water for a couple days, etc. But I have the quotes and the company all picked out and vetted to do the replacement, so I should be able to minimize the inconveneince. Ideally I replace it the day before it leaks
September 19, 2011 at 2:08 pm
As far as renting tools…it depends on what the rental will cost you….a co-worker recently bought a tile cutter because they’d need it for a min. 3 days to get the job done. The cost to purchase was about $20 more than a one day rental. Soooo when we get ready to do work around our house I think we’ll be “renting” his for some baking and maybe a brew or two.
Rental isn’t always the less expensive way to go…hopefully good research sends you down the best path.
September 19, 2011 at 4:07 pm
I agree Geoff – for almost everyone buying a water heater makes more sense than renting. Recovery is in about 2 years or so if I recall. It’s just that we’re extremely conservative on these things and my wife decided she didn’t want the hassle or expense and paying the premium of a rental was worth it for her. But the decision was based on utility (how much we cared about convenience vs. cost) , not just leaving it there.
Renting modems for internet, hot water heaters, things like that, if you can cover the upfront costs, almost always make sense to buy outright. Never mind what the costs are for renting furniture and TV’s that I see some stores do.
September 19, 2011 at 4:16 pm
@Geoff – just got our Hot Water Heater rental – it’s $12.98 per month including taxes. That’s $155.76 per year – now. It was less than $10 per month when we started back 10 years ago (and less tax – now includes HST). However, over the time period, that’s under $1557 for 10 years, with three replaced, the cost was $519.20 each. That includes the removal of the old one, a new one brought in, installed and area cleaned up. Like I said, the cost has gone up a bit over the years, but for us, it is like insurance – and we’ve used it wisely. For those who don’t have heavy iron content in their water, it wouldn’t be worth it to rent. For us however, it is a cost effective method.
September 19, 2011 at 9:50 pm
I know a lot of apartment buildings or condominiums rent their common washing machines and dryers. I guess sometimes it’s easier to not have to worry about maintenance even though you are paying a bit of a premium for it.
September 20, 2011 at 2:14 am
For the ladies: As a guy, I cannot attest to this service, but I did remember seeing this on my twitter feed once from a local startup community manager:
http://rentfrockrepeat.com/
It is basically a rent-a-high-end-dress service.
Disclosure: I have no business or otherwise interest in this product. I have never used this service. I do not know anything about its pricing structure. I do not know anything about the quality of this service. Please exercise your own discretion if you wish to look into it. I only happened to have hear of its existence through twitter.
September 20, 2011 at 9:24 am
CH:
I haven’t used Rent Frock Repeat either, but I have a friend who has used the service and was very happy with it.
I’ll probably give it a try around Christmas time
September 20, 2011 at 9:07 pm
Have to second the Bissell Green Machine. I got a terrific deal on it and use it a LOT (I have three cats, who always choose the carpets to recycle their breakfasts on) plus a friend has borrowed it several times. WELL worth it to buy. Fantastic little machine!
September 21, 2011 at 7:01 am
It’s so true. Just last week I went to buy a new car, and the special promotion for a two year lease was so compelling I defied conventional wisdom and ended up renting (leasing) the car instead. 25 month lease contract at 0.25% AND free scheduled maintenance. This way I can use my own capital and earn a much higher rate of return than the cost of this money. I wrote up the experience in my blog Gail. http://rosstaylor.org/ross/ask-ross/buying-this-new-car-was-actually-fun/ It also helped to have the Automobile Protection Agency (APA) on my side – I saved even more $$.
September 21, 2011 at 3:38 pm
When renting isn’t an option, there are numerous box stores that allow you to return a product if you are not completely satisfied. Take advantage of this policy!
March 15, 2012 at 2:30 am
Thanks Lisa you are quite right. I appreciate you. I have the same word. I thgink I will try to get this policy for getting some exceptional advantage.