Renting vs Buying

In the last decade, the idea of sharing and monetizing the things you’re not using has become a cultural phenomenon. Thanks to technology, people are now sharing everything from homes to pets. Have an empty guest room? Airbnb can help you. Got a car and a few extra hours on the weekend? Uber can match you up with a rider.

So the question arises, what is better to do, own or rent?

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I think the answer comes down to equity. If you have a car, it will depreciate in value. A house less likely, so still good to own.

For us, the situation is a mixture. We own but we don’t live in the place we own. We rent that out and remain renting elsewhere.

We hire cars when needed and since this is infrequent can often hire a more luxurious car than we would be able to purchase, costing the same over the year.

The food sharing app Olio have just released a borrow feature and I love it. I can lend something out to someone (free, not rented) so they don’t go and buy it. For example my toolkit when they just need a hammer and some nails for a weekend.


I have not heard of this app. This is cool. There are so many things you only need a few times a year. So renting is ideal for that.

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You need to think about liquidity, flexibility and your tax position.

For example if you buy a home that you don’t live in you may find yourself exposed to tax - in the UK there’s capital gains and inheritance tax relief on your primary residence.

The capital gains tax exposure arises for property because it tends to appreciate in value. Cars tend to depreciate so are not generally exposed to capital gains tax (classic cars may be an exception), but you end up with depreciation as a cost of ownership. The purchase tax on new cars is so significant that you’ll see a lot of instant depreciation on a new car. Both cars and property come with maintenance/insurance and service charges which can be significant - even if the owner/landlord includes these in the rent, the risk and hassle (which can be significant) is theirs.

If you want the flexibility to change your house (you can’t move it) or car when your circumstances change then buying comes with reduced liquidity and higher frictional costs (legal fees, purchase tax).

In both cases the owner/landlord will only take on the hassle/risk of renting to you if they’re making money, so you’d likely be paying a premium to rent. There needs to be a benefit for doing so - usually access to capital (you couldn’t otherwise afford it) or liquidity/flexibility (you want to be able to change cheaply/quickly).

If you buy a car or house with a large loan or mortgage then you can think of your loan/mortgage payments as a rent to your lender (who doesn’t own the hassle of maintenance and service charges). Although some car leasing contacts do include maintenance/servicing.


A lot of things that affect the choice of rent and purchase. It is different for each person, and it depends on their lifestyle choices!

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