Know the renting versus owning math – DNA

When Souvik and Lahari Basu shifted to Bangalore, the husband-wife duo did not go out to crowded bazaars or glitzy shopping malls to buy furniture and appliances. For their rented apartment, they opted for rented furniture and appliances just as they use Uber/Ola to commute daily. Why? “Because it involves no upfront investment and is convenient. Just how we pay rent for the house, paying rent for other stuff works well too,” pat comes the answer.

The Basus are part of a growing tribe of millennials who don’t really care about owning an asset. So, cars, books, clothes, furniture, appliances and everything else is rented. These consumers prefer a hassle-free lifestyle because owning an asset is not only a frightful expense, but its maintenance eats into any economic value that is left. How does renting versus owning really work out as far as personal finance is concerned? DNA Money talks to experts to find some answers. Keep reading.

Renting furniture:

Online platforms like Furlenco, Rentickle, Pepperfry, Fabrento, Cityfurnish and many more allow you to have a full drawing room, bedroom and much more on hire. The flexibility of on-demand furniture, without a security deposit, pocket-friendly rents, shipping in 72 hours and the ability to change the furniture every three months are among the factors cited by users to opt for rented furniture.

But does it make economic sense to rent when you can own? “The cost of doing up a home costs anywhere between Rs 1.25 – 1.5 lakh with regard to furniture and soft furnishings,” said Ajith Mohan Karimpana, founder and CEO, Furlenco. While renting this costs anywhere between Rs 4,000 (basic) to Rs 6,000 (premium), he claimed.

For professionals who move cities every few years as part of their jobs, the cost of relocating and repairing damaged furniture/appliances can be huge. “Hence, for a 25 month or two-year window – it makes sense to rent furniture as against buying it. Usually every two years, furniture needs also tend to change and, hence, even beyond that point it makes economic sense to rent,” added Karimpana.

Choose and upgrade as per your life needs

You can rent exactly the furniture that you need based on your needs, at any point of time. For instance, if you are a bachelor, you can choose studio solutions + basic appliances. Once you want to upgrade if your life needs change (you get married), you can upgrade to a queen/king bed and add on more accessories. Once you have kids, you can upgrade to a kids’ subscriptions program.

At any stage of life, you have exactly the furniture you need for that stage of life, without the hassle of buying and selling the furniture. With hired furniture and appliances, many platforms offer free relocation services and damage waivers. Typically, a basic bedroom and living room package starts at Rs 999/month and the premium variation of the package goes up to Rs 2,500/month.

Renting vehicles for personal use

Purchasing a car is a costly investment. The same is true for bikes/scooters if you are at a low-income level. The liability of a loan for buying your own car or bike is, at the end of the day, a burden. This is why many platforms like Avis, Zoomcar, Kayak, Revv, Drivezy, Vroomdrive, MyChoize, etc, encourage the self-drive rental option.

A mid-level car costs Rs 5-6 lakh on-road. Plus, there are charges for annual repair, maintenance, parking, insurance and so on. By renting, some of these expenses can be consolidated. What’s more, they can even turn out to be cheaper.

Sunil Gupta, MD and CEO, Avis India said: “A freshly bought car can depreciate by as much as 25-30% in the first year and by 15-20% in the subsequent year, thereby not holding much value as an asset after a few years.”

Furthermore, self-drive is popular among people in their mid- to late- twenties, who are primarily professionals. Once you take out the driver salary of Rs 12,000-20,000 per month, renting is not a bad proposition. The monthly instalment for a Rs 5 lakh car loan, for three years, can be about Rs 16,100. Rents can come cheaper. At Zoomcar, somebody in Hyderabad’s Banjara Hills can pick up a sedan at 9 am and leave it at 7 pm, after travelling 50 km the same day, for Rs 700 only. So, if you do that for 20 days a month, you pay Rs 14,000.

“On average, cars are parked most of the time and, hence, buying a car becomes more of a liability than an asset. Renting of a self-drive car is simpler as it includes none of the regular additional expenses that come with an owned car, making it a more favourable option for the user. Hence, making renting an alluring option for people of all age groups,” said Gupta.

Additionally, buying a car of your choice can lead to large down payments and Equated Monthly Installments, which can continue for several years, whereas, renting can give you the variety to choose a car for every occasion. Hiring a car can also be an environment-friendly choice, as it makes a significant contribution to the reduction in a city’s traffic and subsequently, pollution levels.

Similarly, scooters and bikes can be rented for small amounts. For instance, platforms like Rentrip allow you to get pay daily rent of Rs 350-1,800. On a monthly basis, you can get deals for Rs 6,500 a month to Rs 20,000-40,000 a month.

Today, renting platforms offer a variety of items required for daily use. Rentomojo offers 20 shirts at Rs 1,499 / month deals. Even gadgets like DSLR cameras and video game consoles can be rented on a daily basis for a few hundred rupees.

Cost-benefit analysis

Personal finance experts believe that users must look at a few factors before deciding between buying and renting. Firstly, see when the cost of rent equals the purchase price. “When you look at the purchase price of any good, be it a car, fridge or furnishing the whole room, account for credit card interest rates if you are taking a loan. For shorter periods like one to two years, there is no sense in buying something. Be it mobile phones or even appliances, problems start surfacing around the two-year timeframe. Also, include maintenance costs. Cars and bikes can help you escape some maintenance and repair cost due to insurance, but taking an insurance cover is a cost too,” pointed out Ravi Sharma, a certified financial advisor.

Secondly, renting on platforms can also involve costs. Home delivery of a rented good may not always be free. If you damage the good, and the damage is above a certain limit, you may be required to pay the differential. There could also be penalties/fines for the late return of a rented product.

“When you own things, you do not need to worry about returning them or associated renting charges. I do not believe that renting for long-term is a good solution. Nobody actually allows you to rent something at a lower cost. Yes, at the upfront the cost of rent does seem low,” said Anilavo Datta, who works in a telecom company and moved to Pune about a year back.

The debate on renting versus owning maybe wide open, but increasingly a large share of millennials are taking a very practical approach to asset utilisation.

HOW THE COSTS COMPARE

• Rs 1.25-1.5 lakh-Buying furniture
• Rs 4,000-Rs 6000 – per month cost of renting furniture
• Rs 16,100-EMI on Rs 5 lakh car loan for three years
• Rs 700-daily charge for renting a car for 10 hours

Avis

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