Question

How do the costs and benefits of renting and buying a home compare? How do the costs and benefits of leasing and buying an automobile compare?

Answer 1

Fall in home prices combined with low mortgage rates make buying and owning a home cheaper than renting one.This is even good from investment point of view as it creates wealth.But in the reverse case renting becomes cheaper than buying a home.When interest rates and home prices go up,it is difficult to buy home.So it is cheaper to rent than buy.In a recent research,it is seen that renting may now also be a better investment.Renting and reinvesting the savings from renting ,on average,will outperform owning and building home equity,in terms of wealth creation.

The monthly payment for buying automobile is more than leasing.Leasing require little or no down payment and there is no upfront sales tax charges also.On the other hand,down pàyment is more in buying automobile resulting into higher initial out-of-pocket cost.However, in case of buying automobile you own the automobile one day which gives you the right to sell the car unlike leasing.Depriciation plays a very important role in leasing and buying automobile.In a lease the automobile is rented for a fixed period,so payment for depriciation is only for the used period instead of absorbing the full depriciation cost of the automobile.Whereas, in case of buying depriciation may result into a situation in which the automobile is worth less than what the buyer still owes on it at a given time.So from depriciation point if view leasing is better.However ,it may be noted that the Insurers usually charge higher cover costs for leased vehicle.