To Rent or Buy: Knowing the Right Housing Choice for Your Wallet

The following is a guest post by Melissa Marshall. Enjoy!

For people in the UK who are trying to make sense of the property market and their options, it can feel rather like a game of pontoon, and you don’t whether to stick or twist, in terms of renting or trying to buy your own home.

There are some attractive properties to discover at Entwistle Green in Liverpool for example and in certain areas around the country, it could work out cheaper to buy than to rent.

The buying or renting conundrum

If you were looking at a map of the UK where rents and property prices are at their highest level, the very epicentre of the most expensive area would be central London, where property prices and some rents, look more like mobile numbers rather than an asking price.

Interestingly, as you work your way out of that price hotspot in the city of London and spread out to other cities across the country, the numbers become not just infinitely more manageable in terms of affordability, but overall, in just about 35% of the rest of the UK, the mathematics come down in favour of buying rather than renting.

As you would expect, buying in some cities such as Glasgow and Dundee in Scotland, can offer some clear blue water in terms of a definite monthly saving achieved through buying rather than renting a property in these areas.

However, there are also a number of cities like Manchester and parts of Liverpool for example, where your mortgage payments will still be cheaper than many rental payments for an equivalent property.

It is still probably cheaper to rent than to buy in locations like London and Cambridge as prime examples, but as general view, the further north you head in the UK, the greater the chance than buying will trump renting in terms of monthly cost savings.

Savings to be made despite rising house prices

The property website Zoopla came up with some figures recently which seem to convincingly support the argument that buying a home is cheaper than renting in many major cities throughout the UK.

The study concluded that nearly half of the major cities offer you the chance to make savings through buying rather than renting. Interestingly, buying instead of renting was cheaper in 36% less than a year ago, but that figure has since risen to 48%, suggesting that there a growing number of opportunities to save money each month if you can get yourself on the housing ladder.

Barriers to overcome

It is fair to say that actually buying your own home is not always that easy in comparison to renting, as there are barriers to overcome, such as raising a big enough deposit and being able to afford the additional expenses associated with moving such as stamp duty and legal fees.

The average house price in the south of the country is now well over £300,000, which means that raising a deposit and having enough income to pass the affordability check, could be an issue.

If you widen your property search to the midlands and the north, the UK housing market offers far more opportunities in terms of affordability, as the average house price is closer to £150,000, giving a clear example of what is meant when people talk about the perceived north-south divide.

How the numbers work

Working on the basis that you are able to raise a 10% deposit in order to buy your own home, which is the typical percentage required, you will put yourself in a position to make savings over the term of your mortgage, in comparison to what you would spend on rental payments.

A typical mortgage where you put down a 10% deposit and pay the mortgage back over a period of 25 years at a fixed interest rate of around 4.5%, should see you end up paying less to own your home than renting.

The other major factor to consider is that once you have paid off your mortgage, you will own your home outright and be able to profit from any subsequent rise in values over the time that you have owned it.

There are pros and cons to both options, as you might have more flexibility to move around more easily when you are renting for example, but if you do want to make the most of the money that you have available each month, it could turn out to be cheaper to buy than to rent, especially if you are casting your net well away from the London area.

Five Advantages of Renting a Car for a Long Trip

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

The next time you’re considering taking a long trip, put renting a car on your list of options for that trip. There are at least five advantages to renting a car for a long trip, rather than flying or driving.

1. Saving Air Fare on Short- to Mid-Range Trips

If you typically fly to a destination that is in the 250 to 500 mile range, renting a car and driving it direct to the location can save you a substantial amount of money.

Up to 500 miles, you’re basically talking about flight time of about an hour. But it can easily take you at least two hours on each side of that flight – two hours driving to the airport and going through security, then another two hours getting off the plane and booking a rental car. You’re looking at a time investment of at least five hours should you fly.

If you decided instead to rent a car and drive the distance, you can probably get there in about eight or nine hours. Yes that is longer than the five hours we just discussed for a flight. But as we all know, flights can be delayed, or you could be bumped to another flight, which can quickly get you up to eight or nine hours – or even more.

If you rent a car instead of flying for short- to mid-range trips, you have the following advantages:

  • Your time of arrival at your destination is likely to be more predictable, since you will not have to rely on the airlines or conditions at the airport.
  • You will already have your car rented upon arriving at your destination.
  • You will save a substantial amount of money on round-trip airline tickets, especially if you would need to rent a car at the destination.

You certainly don’t want to do the car rental option much beyond 500 miles. But if it is within that range, you can save yourself a lot of money, as well as a lot of hassle, by avoiding the airport experience entirely.

The advantages of renting a car for a trip can be even more substantial if the other option is to drive your own car there.

2. Avoid Wear-and-Tear on Your Own Car

People often choose to drive their own car on a short- to mid-range trips as a way of saving money. But on deeper analysis, the savings are not as clear as it seems at first glance.

While it is true that you will save money by not renting a car, you are in fact adding deferred expenses to the cost of using your own car as a result of putting more mileage on it.

Let’s say that you decide to take your car to a destination that’s 500 miles away – that’s 1,000 miles round-trip. Adding that many miles will not only accelerate the need for certain car repairs, but it will also cause the resale value of your vehicle drop. According to some sources, it could be as much as 10 cents per mile, or about $100 for a 1,000 mile trip.

You can generally rent a car for as little as $200 for up to seven days. If you count the decline in resale value of your car, as well as potential deferred repair costs, it may actually cost more to drive your own car than it would to use a rental.

 

3. Dealing With Mechanical Breakdowns is a Snap With Car Rentals

If you are driving your car and it breaks down along way from home, not only will you have to pay the cost of having it repaired in a remote location, but your trip will also be delayed, possibly by as much as two or three days.

However, if you rent a car for the trip, and the car breaks down, you simply need to call the car rental company, and they will typically replaced it within an hour or two. You’ll then be able to resume your trip, having experienced only a slight delay as a result of mechanical breakdown.

It should also be worth noting that if your own car breaks down far from home, you’ll probably pay a lot more for the repair than you would if you were on your own home turf. This is because not only will you lack access to your preferred mechanic, but you may be forced into getting the job done as quickly as possible in order to maintain your travel schedule.

 

4. A Rental Car May Be Newer Than Your Own Car

If your own car is more than a few years old, you could be at substantial risk of a breakdown while you’re on a long-distance trip. This is more relevant than ever since the average age if a car in the US is now at a record 11.4 years.

That being the case, you can rent a car that is typically somewhere between brand-new and no more than two years old. Such a car would likely be much more reliable on a long-distance trip, not the least of which because the car rental company maintains a regular maintenance schedule on the vehicle.

In short, the rental car may be better able to weather a long-distance trip than your own car.

 

5. Choosing the Vehicle That You Need

Still another issue may be that your own car is not well suited to the trip that you want to take. For example, if you have a subcompact car, and a family of four, it may get more than a little uncomfortable on a long trip, particularly if you are packing luggage.

In that situation, you may be able to rent a larger vehicle, that will be better suited to the needs of your particular trip. Though the price will be significantly higher, you can even rent a van or a large SUV, if that’s what you happen to need.

If you do have to take a trip is not more than 500 miles away, give some serious consideration to renting a car for the purpose. It’s generally both less expensive and more flexible than driving your own car, and certainly than flying. And if the car can be rented with no mileage charge, it may be more cost effective even on much longer trips.

How about you all? Have you ever rented a car for a trip instead of flying or taking your own car?

Share your experiences by commenting below! 

***PHOTO: https://www.flickr.com/photos/pauliospictures/13455468185/sizes/n/

When To Rent And When To Buy – A Guide

————————————————————————————————————————
Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
————————————————————————————————————————

Click here to enter my free $65.84 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to charity! Deadline to enter is May 31st, 2013.

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.
Many of us have been conditioned to think that if we want something, the best way to get it is to buy it.

But, there are many situations where it may be better for us to rent the items that we want instead. It can be difficult to decide whether it will be more cost effective to buy an item or to rent one, but there are some guidelines that you can use to help you make the decision.

Here is how to decide when to rent an item and when to buy it:

Houses

One of the biggest expenses for any household is housing. Many financial experts will tell you that you should try to purchase a home as soon as you can because of all of the advantages of home ownership, but in some cases, it may be smarter to rent your home than it would be to buy it. Here is how to tell the difference.
When To Rent
One of the biggest factors when determining whether you should be renting a home instead of trying to purchase one is the amount of time that you plan to spend in the area. If you have just moved to a new area and are not sure if you are going to like it, it may be better to rent a home for your family for a few years so you can see how you enjoy the neighborhood. This gives you the option to move to another part of town without a great deal of hassle if you decide that a particular neighborhood is not for you.
People that have just secured a new job and have relocated to be closer to their employment may also find that it is more beneficial to rent a home at first. That way, if you find that the job is not what you thought it was or if your new boss is a tyrant, you will not have the weight of a home to sell holding you back from exploring other employment opportunities. It is also better to rent if you feel you may be promoted to another position at another location within a few years. It is never cost effective to buy a house that you will be in for less than five years.
When To Buy
If you have lived in the area for a significant amount of time and know that you will be living and working in the area for the foreseeable future, then it may be more beneficial for you to purchase a home in the area. Purchasing a home will often result in lower payments than you would have to pay each month while renting a similar sized home and you will receive the tax benefits from the government that are reserved for homeowners. You will also have more control over the property and what you can do with it, including decorating any way you want, obtaining pets, and changing the exterior of the home.

Clothing

Outside of tuxedos for weddings, many people do not think about renting clothing to wear, but you would be surprised at the amount of clothing that is available to rent for people of all ages and sizes.

Because clothing can be expensive, it often doesn’t make sense to buy all of the clothing items that you desire for all of the occasions that come up. Here is how you can make the decision on what choice will be best.

When To Rent
For almost every special occasion, it will be more cost effective to rent the clothing that you need instead of buying new items. Special occasion dresses for women can cost hundreds of dollars, and suits for men can be even more expensive. In most cases, the main clothing items that are worn for these occasions are only worn once and then are left in the closet for many years untouched. Special occasions when you should consider renting clothing include weddings (especially wedding dresses and tuxedos), proms, and captain’s dinners on cruise ship vacations.
When To Buy
It is best to limit your clothing purchases to things that you will be wearing frequently and things that will last from year to year. Staple items, like t-shirts, jeans, and work clothes are always good purchases because you will get your money’s worth of wear out of them. The cost per wear ratio gets even better if you are able to purchase these items when they are on sale or on clearance. You should also buy the clothing items that you know you may need multiple times over the next few years, like a black suit for job interviews and funerals. Purchase shoes that can go with multiple outfits instead of unique ones that only match one or two items in your closet.

Tools

Buying tools can be very expensive, especially if you need specialty tools for a home improvement project. Fortunately, you do not always have to buy a tool to be able to use it for what you need. In many cases, it may be better to rent the tool than to purchase it outright. Here are some signs that can help you make the decision.
When To Rent
If you will only be using the tool for a specific project, like remodeling the kitchen or removing a tree from the backyard, it is often more cost effective to rent the tool for the length of time that you need it. Once you have used the tool, you can return it to the home improvement store that you rented it from, paying a fraction of the price of purchasing the item and saving valuable storage space in your home, shed, or garage. Renting a tool is also good if it is the first time that you have ever used that particular type of tool, so you can see how it works and how you like it before you decide to buy.
When To Buy
If you know that you will be using a tool frequently or for multiple projects, it will be more beneficial to buy it and have it on hand than to run back and forth to the store to rent it every time it is needed. Tools that are purchased should be versatile and you should be comfortable in its use before you decide to purchase it. Every home should have a toolbox with basic tools in it to handle basic home and appliance repairs, but other specialty items, such as chainsaws, demolition hammers, and electric sanders, should only be purchased if you are sure that you are going to be using it multiple times during the course of a year.
How about you all? Do you typically rent items you use infrequently, or do you just buy instead? What items do you usually rent?
 
 Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/john_hall_associates/3110849717/