Possession is not always what one desires.
For many reasons — including affordability — more Americans are choosing to rent everything from cars and apartments to clothes and furniture these days, according to a report from Intuit Credit Karma.
The tuxedo rental industry has expanded in recent years to include electrical appliances, musical instruments, designer handbags, baby gear, and even funeral caskets.
Now, Credit Karma finds that 28% of adults routinely rent goods and services. However, when you include housing, that number jumps to 47%.
The growing share of renters is largely due to rising prices, although some people are simply preferring to rent over buying, opting for a “rent-first” lifestyle, according to the survey of more than 2,000 adults in June.
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Beyond affordability concerns, more than half of respondents — 58 percent — said they find value in renting, because it allows for more flexibility and is a way to avoid overconsumption, which has become a growing concern among millennials and Gen Z adults.
“Renting is a great option for many people,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Fla. But she advised always doing the math.
“Some people rent clothes that are great, and for special occasions, that can be a good thing,” said McClanahan, who is also a member of CNBC’s board of advisors. “However, if you know you have a lot of special occasions, some really good pieces (that you own) can last a long time.”
Apparel prices have been hit hard by inflation. Since July 2020, men’s and women’s apparel prices have risen 15% and 13.3%, respectively, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index.
At the same time, it may not make sense to lease a car, says McClanahan, “because that ends up costing you 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 usually ends up costing less than leasing in the long term, especially for consumers who keep vehicles for years.
Additionally, car rental agreements often come with routine service included in the terms, but the downside is that there are also mileage limits and potential wear and tear fees.
Most importantly, car buyers will benefit from owning the car outright at the end of the loan term, and will have built equity in the original.
Buying or renting a home in today's market
Since housing costs are most people's largest expense, it may make sense to rent a home, at least at first.
“Unless you’re absolutely sure you’re going to stay in the home for at least five years, you should definitely rent,” McClanahan said. “Only when you’re settled into your life, your job, and your family does it make sense to buy a home.”
Since millennials are more likely to postpone marriage and starting a family, they are able to expand their search when looking for a place to live, or move for a job, if necessary, which makes renting more feasible.
“This generation is different,” said Dottie Herman, a vice president at Douglas Elliman. “They believe in home ownership, but now they have a choice.”
“It’s not important to them to own a house,” Herman says. “A lot of them say, ‘I’ll rent a house and I’ll think about it.’”
Of course, some Americans, especially young people, rent because they have to.
High mortgage rates and a shortage of housing on the market relative to buyer demand have kept home prices high and created an affordability crisis for potential buyers. Sometimes renting is the only option.
Nearly three-quarters of homeowners said affordability was their biggest obstacle, according to a report from Bankrate. Credit Karma also found that 50% of young adults said homeownership was only possible for the wealthy.
Although wealth building has been concentrated among homeowners in recent years, there is often pressure to buy when it may not make financial sense, according to Michael Crow, director of financial planning at Edelman Financial.
“Don’t buy a home just because you think it’s going to go up in value,” he said. “You may think your home is an investment — and it’s not. Your home is a place to live.”
“Buy a home because you like the neighborhood, the schools, and the proximity to friends and family,” Croy said. Renting in this market can have benefits, he added, especially if it allows you to avoid overspending beyond your means.
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