How do you compare renting vs. buying a car?
The question of whether to rent vs. buy a car isn't about the week-long business trip, the weekend getaway, or the weekday shopping spree in the city. To compare car rental vs. buying, you should focus on one month or longer rentals. And to make the most informed decision, you'll want to consider the question from an annual perspective. How often will you need to have a rental for a year, and how much will that cost? Calculate as best you can, and then compare it to how much it costs to maintain a car you own for a year.
What are the benefits of renting a car vs. buying?
The benefits of renting a car long-termare generally financial in nature and include:
- No credit checks/qualifiers: If your credit history is less than stellar, a loan or lease can be more expensive. With long-term rentals, your credit score doesn't affect your rental cost.
- No major cash investment upfront: Long-term rentals don't require large down payments or outright purchases. Some rental companies may require a security deposit, but you can get that back at the end of the rental term.
- Lower payments: The monthly loan payment for a car you own is generally more than a monthly rental payment.
- No fees/taxes: Standard expenses include taxes and fees at purchase and registration and inspections every year when buying a car. You're not responsible for any of these in a long-term rental.
- No wear-and-tear maintenance costs: You won't have to pay for things like new brakes or tires on your long-term car rental.
- Lower insurance premiums: A lender may require coverages and limits for car insurance beyond what your state laws may require. A collision damage waiver (CDW), similar to auto collision coverage, may be included in your long-term rental fee, and your credit card company may provide additional coverage for you.
What are the benefits of buying a car over long-term rentals?
Although long-term car rentals offer many potential financial benefits, there are many non-financial considerations to buying a car that may outweigh the savings from rentals. Learn more about how to buy a new car.
- Convenience and peace of mind. Owning a car means having the ability to drive somewhere whenever you need to.
- No mileage limits. Long-term rentals usually come with mileage limits. It may not be a concern, but it is a limitation that exists.
- Customization: You can add features to a car you own, like a tow hitch for functionality or a remote starter for comfort.
- Vehicle preference. Within your budget, you can buy any vehicle you want. For long-term rentals, you're limited to the selection offered by the rental company, which may not always have the type of car you want or need at the time.
- It's an asset you own. Yes, a car depreciates over time, so you won't be able to sell it or trade it in for as much as you paid for it. But you will get some value out of it, which can't be said for a long-term car rental.
Should you rent or buy a car?
Now that you have a sense of the pros and cons of renting vs. buying a car, you can make an informed decision. Because cost is usually the biggest factor, take the time to consider all the expenses you may incur in both scenarios. When you're comparing costs, remember that you may not need a long-term rental for an entire year, so adjust your cost calculations accordingly.
