Possession isn't always all it's cracked up to be.
According to a report, more Americans are now renting everything from cars and apartments to clothing and furniture for a variety of reasons, including affordability. Intuit Credit Karma.
In recent years, the rental industry has expanded far beyond the traditional tuxedos to include power tools, musical instruments, designer handbags, baby products and even funerals coffin.
Credit Karma found that 28% of adults now regularly rent goods and services. However, when housing is taken into account, this proportion jumps to 47%.
A survey of more than 2,000 adults conducted in June showed that the increase in the share of renters was mainly due to rising prices, although some people simply prefer to rent rather than buy, choosing a “rent-first” lifestyle.
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In addition to affordability concerns, more than half (58%) of respondents said they believe renting is valuable because it provides greater flexibility and is a way to avoid overconsumption, which has Becoming a growing concern among Millennials and Generation Z adults.
“Renting is a good option for many people,” says Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. However, she advises, it's always worth doing the math.
“Some people are happy to rent clothes, and for special events, that can be a good thing,” said McClanahan, who is also a member of CNBC's advisory board. “But if you know you have a lot of special events, some really good (owned) pieces can last a long time.”
Clothing prices have been hit hard by inflation. According to the U.S. Bureau of Labor Statistics' Consumer Price Index, since July 2020, prices for men's clothing and women's clothing have increased by 15% and 13.3%, respectively.
Meanwhile, McClanahan said leasing a car may not make much sense “because it's going to cost more in the long run.”
Although monthly lease payments tend to be lower than car loan payments, financing a car with a new or used car loan often costs less than leasing in the long run, especially for consumers who hold on to the vehicle for many years.
Additionally, regular servicing is often included in the terms of a car rental agreement, but the downside is that there are also mileage restrictions and potential wear and tear charges.
What's more, car buyers will have the benefit of owning the vehicle outright at the end of the loan term and building equity in the equity.
Buy or rent a home in today's market
Since housing costs are most people's largest expense, renting may make sense, at least initially.
“Unless you're absolutely sure you're going to live in a home for at least five years, you should absolutely rent,” McClanahan says. “Buying a home may only make sense when you're settled in your life, your job, and your family.” “
“This generation is different,” said Dottie Herman, vice chairman of Douglas Elliman. “They believe in homeownership, but now there's an option.”
“It's not that important to them to own a home,” Herman said. “A lot of them will say, 'I'm going to rent, and I'll think about it.'”
Of course, some Americans, especially young people, rent because they have to.
Higher mortgage rates and a shortage of homes on the market relative to buyer demand are causing home prices to rise and creating an affordability squeeze for would-be buyers. Sometimes renting is the only option.
Nearly three-quarters of potential homeowners say affordability is their biggest obstacle, according to a report bank interest rate. Credit Karma also found that among young people, 50% said only the rich can own a home.
Michael Krowe, director of financial planning at Edelman Financial Engines, said that while wealth creation in recent years has largely focused on homeowners, there is often pressure to buy when it may not make financial sense.
“Don't buy a home because you think its value will go up,” he said. “You may think your home is an investment, but it's not. Your home is a place to live.”
“Buy a house because you like the community, the schools and the proximity to friends and family,” Crowe said. He added that renting in this market could be beneficial, especially if it keeps you from living beyond your means.
