Following the comments you left on the article " The rule for whether you should rent or buy your home " I am whether this rule to decide between buying and renting your primary residence could not be generalized to other types of purchases we make. Under what circumstances should you rent an object rather than buy? The case of buying or renting your primary residence would it not a special case? And if renting more often you could free up money for projects you have the most to you?
The first rule: the duration of use The first rule that comes to mind is that it is better to rent something that you will use only once or not often enough to justify its purchase. In this sense the location of your main residence could be a special case: your primary home, you live there almost every day. The criterion is not the same. By digging a little deeper, though the cases are similar.
Because the rule is still true that the ratio of price / rent. If property costs 150 euros, whether you rent 50 euros each time and you think you are using at least three times, you'd better buy. This applies even if you think living 20 years in the same place that 20 years of rent equivalent to the price of housing. If the ratio price / rent is less than or equal to 1, you have to buy. You understand that if your housing rent portion is equal to the amount Monthly * 12 * years in the place.
An important distinction is that the home you buy can eventually be assessed while many other properties will lose value. The ratio price / rent is a first indicator easy to calculate. To be precise, it is an indicator TCO / Rent you should calculate. We had already talked in the article on real estate . By calculating the total acquisition cost of the object (Total Cost of Ownership including the amount of the eventual resale once the duration of past use, maintenance costs, maintenance, insurance, fees various related to the object, ...) divided by its total rental cost, you get a much more accurate figure. But who actually enjoys to calculate them? I did the exercise recently in the case of the automobile.
A concrete example: automotive
We have a little Margaret who was born a month ago. With a family, I asked myself the question of buying a car, which is a major item of expenditure. Today a majority of us live in cities. If you can go to your work and do your shopping on foot or by public transport, using home delivery and Internet orders, you do not often need a car.
I calculated that we would need to rent a car one to two weekends a month. You can rent a family for about 150 euros per weekend. Even assuming 2 weekends a month, it only amounts to 3,600 euros per year. We are very far average annual budget car which was 7600 euros in 2008 . This is a simple way for many urbanites to halve one budget result.
course this choice is not only on financial criteria. There is not yet even in Paris, a service that allows you both to rent a car for a few hours for you visit with friends, and some days, to go on weekends or holidays. There is a business to create in this sector. Need to rent a car always brings a lot of stress and takes away the freedom to leave whenever you want wherever you want. You must book in advance to have a great rate.
The real cost of ownership for your belongings
I'm talking about a matter that has occurred recently in my personal life, but it is clear that the issue of rent arises very often: a suit or a handbag for a special occasion, tools for work, a film, a boat if you like sailing or fishing trips, a sports car if you are passionate about exceptional vehicles, a second home ... any property or thing that you may need or want temporarily. Everything is rented or almost.
We all have closets and basements filled with items that we do not use or have used once or twice. Of course you can sell them on ebay but their TCO (Total Cost of Ownership) will still have been much greater than if you had leased, depriving you of money you could have used for projects that will take longer heart.
My experience is that for many purchases, the issue of rent must be raised, then the question of buying opportunity if you want to make the most of every dollar you earn. If you set a family budget, which for me is essential, you will more often your choices on financial criteria. Trade-offs like "I prefer to spend less by spending more, I prefer to rent such an object because I'm not sure you really need after". Ultimately you may decide to buy and even buy new, for very good reasons, but it will not often for financial reasons. Gaining in clarity on the reasons for your expenses, your budget is better controlled and the satisfaction you derive from your spending is more important.
And you, what is your personal experience on the choice between renting and buying? Which goods and objects do you think in retrospect you would have done better to rent than to buy? What rule do you apply to decide between these two alternatives?
Credit: Nicolas Valentin
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