Renting vs. Buying a Car

Renting a car offers several benefits, including the following. 

Variety

You’re typically stuck with a single vehicle unless you can afford several cars. However, renting a car opens up the possibility of renting from several vehicle classes, including various makes and models. You get to pick from the entire inventory rather than sticking to a particular section of a dealership lot. You may even get to drive a new vehicle. 

Selection

In addition to choosing between several makes and models within a specific car rental class, you can also drive newer vehicles that you may not be able to afford if you were to finance them. For example, your budget may afford a 2021 Ford Explorer rental for a few days, but maintaining that car over several years and financing your purchase could set you back significantly. The same is even more applicable to supercar rentals. 

No credit score required

Renting a car requires a debit or credit card with enough room to cover your security deposit (and rental fees, of course). However, most car rental companies don’t check your credit score or look closely at your finances or income. 

Lack of ownership fees

Registration costs, inspection fees, depreciation, and taxes can put a significant dent in your funds when you own a car. However, car rentals include basic auto insurance and maintenance costs. The only similarity is that you do pay taxes on renting the car. 

Fuel Efficiency 

When you rent a car, you don’t necessarily have to worry about how many miles a gallon of gas is. To save on gas, you can simply rent a more fuel-efficient car for your road trip. However, most rental vehicles are within two or three model years, so they tend to be as fuel-efficient as that particular make and model are currently. 

Renting isn’t always the best solution, depending on your circumstances. Below are a few examples of the drawbacks of renting. 

Restrictions

When you rent a car, you only have it for a short time compared to if you owned that vehicle. While most car rentals have unlimited mileage, specific policies limit long distances and crossing borders into Canada or Mexico. You must also pay for any significant damage to the car not covered by any damage waivers or other policies you purchased from the rental car agency. 

Fees

Car rental fees can be steep, depending on how you treat your rental. Most rental agencies charge substantial cleaning fees for smoke, pets, and overall excessive dirtiness. Returning the car early or late costs you, as does dropping it off at a different location from where you picked it up. 

Lack of equity

Any money you pay to rent a car works similarly to the funds you allocate for rent. Rather than investing in a car or a home, you’re paying someone else for using their asset. If you want to build equity in a car, financing or purchasing it outright is often the best route.  

Limited availability 

Finding the best time to rent a car can be tricky if you’re on a budget. Prices tend to spike on weekends and holidays, and seasonal demand can push you toward more expensive rentals due to a lack of economy versus compact cars. 

Many drivers prefer car ownership over renting for the following reasons. 

Build equity 

Each monthly car payment you make goes toward paying off your car loan. If you purchase your car outright, you’ve instantly built up equity you can use when you trade or sell the vehicle. That equity amount may change based on used car prices, but it’s still available.  

Freedom of choice

Owning a car means you don’t have to worry about mileage limits, paying for dents, dings, or wear-and-tear, or returning the vehicle at a particular time. You can modify your own car as you please. Ultimately, you can choose the exact car you want, how to use it, and when to trade it in or sell it for another. 

Lower payments

On paper, renting a car can seem more affordable, but paying for a car can actually come with lower payments than most rental rates. Car rental costs are typically spread out over several days, while the cost of buying a car extends across several years (i.e., the loan term). Even though you’re responsible for the car ownership costs typically shouldered by the rental agency, owning a car can cost less than renting in terms of the monthly cost. 

Buying a car comes with its drawbacks, arguably making renting or even leasing a better option. Sometimes, including the option to lease versus finance a car can give you more insight into what you need from a vehicle and which arrangement best fits those needs. Consider car subscriptions like FINN, especially if you want to pay one fee for maintenance, insurance, registration, and depreciation.  

Timing 

Car buying can have you perusing the calendar for the best times to purchase a car, including Black Friday car deals that could save you hundreds. However, it often seems that the best time to buy a car doesn’t always align with when you need that car. Juggling both can bring undue stress to the situation. 

Higher insurance costs

Lenders typically require financed cars to have higher insurance limits than state minimum requirements call for. You may also extend coverage on a car you’ve purchased outright or paid off to protect your investment. 

Impact on credit and finances

The car buying process requires credit checks, income tallies, and down payments, all of which affect your finances. Prequalifications and preapprovals may only impact your credit score with a soft check, but you must perform a hard check for financing to go through. Interest rates may or may not work in your favor in determining your loan payments. Down payments can also cut into your emergency savings. 

Ownership costs

Whether financed or purchased outright, vehicles require maintenance. These costs fall onto you, in addition to registration fees, taxes, car insurance premiums, and every other expense of owning a car. Car ownership requires a substantial financial commitment that you may not be ready for, even if you have a warranty. 

Depreciation

Cars lose value when you drive them off the lot and each passing year thereafter. While buying used can minimize the depreciation that brings down the value of your car purchase, this loss is nearly inevitable. Buying a car with a higher resale value can offset depreciation, but cars still lose value, especially if they’re not kept well. 

To find out if renting a car is cheaper than buying one, take a look at the 2023 Chevrolet Traverse. First, consider how much it costs to rent a 2023 Traverse from an Avis at the Denver International Airport for one month: 

• $1,411.69 pay now price
• $1,485.99 pay later price 
• $694.05 in taxes and fees

Your total rental cost comes to $2,180.04, including unlimited mileage, if you pay later. In comparison, renting the same type of vehicle from Enterprise would cost you upwards of $4,900, more than double Avis’ price. Further comparison shopping may unlock a lower price, especially if you have membership rewards with a particular rental company. 

Next, consider the five-year cost of ownership for the 2023 Chevy Traverse:

• Depreciation = $19,411
• Fuel = $13,722
• Financing = $9,605
• Maintenance = $5,895
• Insurance = $5,716
• Taxes and fees = $4,622
• Repairs = $929

The 2023 Chevrolet Traverse costs $59,900 to own across five years, or $11,980 annually. That’s roughly $999 monthly, which is far less than renting for over $2,000 monthly.

If you’re looking for a rental car alternative that doesn’t break the bank with a $1,000 payment, consider a FINN car subscription. FINN offers an inclusive monthly subscription fee that includes registration, maintenance, insurance, and depreciation so that you can leave behind the complicated—and expensive—parts of car ownership. Subscribe to FINN to choose your subscription terms and appropriate mileage, with the added convenience of doorstep delivery. 

Deciding between renting versus buying a car can have you wondering why you even want a car at all. If you’re looking for a push in the right direction, the answer lies in figuring out what you’re looking for in a car and what your finances look like over the next year to several years. Caring for a car you finance or own often comes with observing maintenance intervals and troubleshooting errors as they come up. However, renting a car can cut into your budget and leave you further behind in saving up for your next car purchase. 

Ultimately, rental cars offer a temporary or delayed solution while buying a car locks you into a finance deal for at least a few years. If your finances are stable enough to support a purchase, you could come out on top in a few years. If you prefer variety, renting a car might be more up your alley.