Renter Nation – Redux

We are aware that as a result of the recession, more people are choosing to rent rather than buy homes.  What may come as a surprise is that there is an emerging trend towards renting not just homes, cars, and movies, but other items like phones and even children’s toys.

Renting is not just for the poor anymore: The stigma of renting is lessening as more of the 20- and 30-somethings impact the consumer market.  Partly due to the uncertain job market, high student loans, and the need to be able to pick up and move quickly, more are opting for the flexibility of living a minimalist lifestyle. Why buy that designer dress you want but may use only once when you can rent it for the day?

“I want it now”:  Our grandparents put aside savings to buy things, and the boomer generation infamously borrowed. The current generation, still seeking instant gratification but already burdened by debt, is choosing to rent rather than borrow.   And there are advantages.  With the rapid progress of technology and changes in fashion trends, why invest in things today that may be obsolete tomorrow?  For the environmentally conscious, this is one way to reduce and reuse.  We used to borrow tools and such from our neighbors; we are now using websites and social media to share things with a broader audience.

Arithmetic:  So, you are considering renting an item.  Before you do, you have to do the math. Divide the purchase price by the rental fee to determine how many times/days you will need to use it to break even.  Are you likely to use it more times than that? Do you have the room to store the item for an indefinite amount of time? Can you easily resell it at a later date? And then, consider if it is something you will want to keep for its own sake.  Your child may cherish and want to keep a toy long after she has outgrown it. Is there an “ick factor” to using certain items that someone else has already used?

Bottom line:  The old paradigms are shifting, and perhaps for the better.  The trend towards renting may be short-lived and just a product of slow economic growth.  But it could signal a change from the throw-away mentality to one in which we share and reuse more.  Who knows, this may be one trend that turns out to be good for our pocketbooks, the environment, and our culture.

Ina Fernandez CPA is Managing Director of Liberty Capital Management, Inc.

 

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