I’ve been reading many blogs and message boards with tons of “advice” and opinions regarding financial matters.  One thing that I has really gotten me thinking was the whole debate about renting vs. owning both cars and homes.  It seems that many people dismiss the idea of leasing a car as being frivolous due to the fact that after a couple of years you have to turn the car in and start the whole process over again.  Many of these same people are also of the belief that home ownership is a waste of money due to the maintenance, upkeep and taxes.  My question is: what is the difference that renting a home is ok , but leasing a car is such a waste?

hgh imp

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Many people feel that renting a home is the safer way to go simply because there is no need to take on more debt by way of a mortgage; avoid paying property taxes, homeowner association dues, and insurance; and the cost of monthly rent will be lower than a mortgage.  However the reverse is actually more likely to occur.  The lease contract on a rental property is the same as a mortgage, although for a lesser term.  The landlord will take into consideration the monthly mortgage payment, the annual property taxes, as well a buffer put into the rent to cover some of their own expenses including any homeowners association dues and property insurance.  Not only that, but when renting (unless it is an extremely rare arrangement) the renter is still responsible for utilities, maintaining the property, and obtaining renters insurance. 

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In the case of the lease vs. purchase argument regarding cars, similar circumstances are involved.  Many are of the belief that when you purchase a car, you make a one-time payment, and will have the car forever as opposed to leasing where you make your lease payments each month for a set amount of time, and then you walk away at the end of the lease with nothing and are forced to start the process all over again.  They feel that by leasing you will always have a payment to make, where as by owning, it is a one time thing, and that’s the end of that.  Another point of contention is that by owning, you only need to be responsible for maintenance and repairs.  The problem with that theory is that cars wear down as they get older, the fuel economy decreases, and the electronics systems start to fail over time.  By leasing a vehicle, you get a new model every three years or so, which increases the likelihood that you will only be required to spring for routing maintenance such as oil changes and tire rotations.  By owning a car until it dies, you need to deal with the routine care, plus the longer you hold on to it the chances increase that the battery or even on-board computer needs replacing, the engine, belts, transmission or breaks wear out and need replacing or rebuilding.

This is by no means a post to advocate one versus the other.  It is, however, and attempt to understand and possibly get opinions as to why renting is good in one situation and frowned upon in the other when the circumstances are nearly identical yet the popular opinion is the complete opposite for each.

This entry was posted on Thursday, June 26th, 2008 at 2:09 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.