Money Management/Shopping Smart

A Definitive Checklist Of When You Should Rent Vs. Buy

By | Wednesday, May 13, 2020

As a concept, renting is nothing new. But recently, there seems to have been an explosion in consumers’ ability to rent or lease just about anything, from phones to furniture to sports equipment.  You can rent the runway, you can rent power tools — you can even rent your textbooks

Ultimately, whether you buy outright, finance, or lease an item, you want to choose the financing option that works best for you and your life. So when does it make sense to rent something instead of buying it outright? Before diving too deeply into the pros and cons of renting, let’s make sure we have a common understanding of the differences between all of these terms:

Buy outright: When you pay for an item in full with cash, check, or debit card, you own it. You won’t make a payment on it or pay interest. It’s yours unless you decide to get rid of it.  Example: This is when you go to your phone provider and pay for your new phone in full using your debit card. This item belongs to you with no additional payments needed.

Finance: When you finance a purchase in full, it’s yours, but you continue to make payments on the items until you owe it outright. If it is financed as a secured loan, it can be repossessed if you fail to make payments on time, such as with a home or vehicle.  Example: This is when you purchase new furniture for your home using a credit card. You will possibly pay more than the item is worth if the interest kicks in before the purchase is paid off in full. 

Rent or lease: When you rent, you agree to make payments to gain access to the item for a period, and at the end of the lease, you will return it to the company you made the agreement with. Example: This is when you shop online and rent a pair of designer heels for a special occasion. You pay the rental fee and return them as agreed upon.

The Pros and Cons of Renting

There are some inherent advantages and disadvantages of both renting and buying. Here are some pros and cons of renting.

Flexibility: When you rent, whether it’s a home, car, purse, or sports equipment, you have flexibility. If you want to rent a home in one city this year, another city the next year and another the following year, you can. If you want to have a different designer purse each month, you can. If you want to upgrade to the newest iPhone whenever it releases, you can. If you crave flexibility instead of being locked down to a purchase decision, renting gives that to you. 

Instant gratification: Renting gives you the ability to get what you want without having to wait.  For example, if you want a $1,500 purse and you don’t want to save for eight months to be able to buy it outright, you can rent it for $125/mo on websites like Bag Borrow or Steal or Rent the Runway.  If you want to experience living in one of the top neighborhoods in town, you can rent a home there instead of saving for a downpayment, qualifying for a mortgage, getting a realtor and all of the other steps needed to purchase a home in the same area. 

More payments: When we put less focus on ownership, it inherently means that we are agreeing to make more payments over longer periods to rent what we want or to go without the items altogether. This is something to factor into your budget because if you rent a lot, you could find yourself with monthly payments for your car, home, phone, purse, furniture — the list goes on, and that’s a lot of budget categories to keep up with.

Still, if you were to compare how much you’re paying each month when renting versus how long it would take you to save and buy all of the items outright or even how much you’d pay in interest to finance all of the purchases, you might find that renting gives you more access for less. 

You take a smaller depreciation hit: When you rent instead of buy, you don’t have to take the full financial hit in the event that the item decreases in value. For example, when the value of your vehicle decreases, it won’t impact you financially because you don’t have to worry about trading it in or selling it down the road. If the value of your neighborhood decreases, you can just stay until your lease ends and move elsewhere with no worries of how the value of your property is declining compared to how much you owe. 

You won’t gain anything from appreciation: On the other hand, renting and leasing an item also robs you of any financial gain you could experience if the object increases in value down the road. This is most prevalent for homes, designer items, artwork, quality jewelry, and the like. While the appreciation isn’t guaranteed, purchasing gives you the option to reap the benefit if it does increase in value, which can be a significant financial win if all pans out over time. 

When To Rent Versus Buy

Now the question of the hour: When should you rent an item versus buy it outright? Again, there is no hard and fast rule for when you should do either — and it really depends on what item you’re thinking about buying. The criteria for deciding whether or not to rent or buy a home will be starkly different from deciding whether you should rent a designer dress. Generally speaking, however, you should ask yourself these questions before deciding to go either way:

  1. What is your current financial situation? If you’re already swimming in debt, it might not be the best idea to save to make a purchase. Instead, you could rent it and put the other money toward paying off your debt. 
  2. How long do you plan to use the item? If you just want the item for a short period, like a special occasion or extenuating circumstances in your life, renting it might be better than making an investment in purchasing it. 
  3. How often will you use the item? If this is an everyday use item, you could go either way, depending on what it is. 
  4. Is this an item that can appreciate in value over time? If you see this purchase as a potential investment, you might want to consider buying instead of renting. 
  5. How long would it take to buy the item outright/qualify for a mortgage? If it would take you an extremely long time to be able to purchase it, you might want to consider renting it until you can buy it. 
  6. How much do you value the item? If you place a lot of value on the item, it might be worth it to purchase instead of rent it. 


Whether you choose to rent, finance, or buy, do it with an understanding of how it will impact your overall financial situation. Use online calculators to help you determine the actual cost of an item (here’s one for houses and here’s another for cars) Consider your lifestyle and how your purchases can best help you achieve your dream life. Do what works for you while keeping in mind the side effects of living a renting lifestyle. 

Quiana is a content marketing writer, content marketing strategist, and founder of The Write Choice, a content marketing firm specializing in helping corporations, industry experts and small businesses create content that converts to get more leads, visibility and industry authority. You can find her on her website and Instagram

Image via Pexels

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