To rent or to buy?

From homes to textbooks, the decision to rent or buy can be a complicated one, financially. Here's how to decide what's best for you in four of the most common "rent vs. buy" situations. 

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    A house for sale in Culver City, Calif.


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Have you ever been in a conundrum when it comes to renting vs. buying something? It's an issue we've all dealt with at one time or another. Generally speaking, renting provides more flexibility and options, while buying could provide better financial value over the long term.

With new technology and better information, the decision to buy or rent changes. So here's a guide to help you decide whether buying or renting is best for you in four common situations.

Buy or Rent a House

Buying a house is one of the biggest decisions you'll ever make. The transaction costs alone of buying and selling a home should cause you to really consider the following things before you make the leap to owning your own place.

One of the main considerations is your specific location. Each housing market has its own unique circumstances. For instance, in the Atlanta suburbs, the economic downturn has led to unbeatable home prices. Buying is likely your best option there. In a city like Phoenix, where prices are rising rapidly, it's currently a better time to rent.

Another one of the main things to consider is how long you plan on owning the property. The general rule of thumb is that if you aren't planning on living in the house for five years or longer, then you should automatically opt to rent. If you aren't sure of how long you'll be in that area, or your job is unstable, then renting is a much better financial decision.

Of course, maybe you don't mind becoming a long-distance landlord if you do have to move. This New York Times calculator is quite helpful and could give you a bit more insight for your specific situation.

The common misconception is that you are "throwing away money" by renting. That's certainly not the case. There's nothing wrong with renting, especially if you are relatively unsure what the next five years holds for you. It could actually end up saving you money in transaction costs and the annoyance of owning a home that just won't sell.

Buy or Lease a Car

This is a lot more straightforward than the house dilemma. Buying a car, and preferably a used car, is the most advantageous financial move for most folks. If you pay cash for a used car, you can cut costs on taxes and insurance in addition to the savings on the initial purchase.

If you are in the market for a new car, the monthly payments will be less if you decide to lease. You'll also have nothing to show for it at the end of the term. However, if you are intent on getting a brand new ride every couple of years, leasing may be your ideal choice. This is really the only scenario in which leasing a car makes sense. You avoid the hassles of buying and selling in addition to the giant depreciation you would have seen had you purchased a new car and then sold it two years down the road.

If you are intent on getting a brand new ride every couple of years, leasing may be your ideal choice.

A couple of other things to think about are how much you drive and how hard you are on your cars. The fees for going over on mileage and for wear and tear could really add up, making your lease look pretty financially awful. If you can avoid overages in those categories and you really can't stand driving anything more than a few model years old, leasing is your best bet.

Just know that buying a used car is better in the long run and becomes more of a windfall the longer you keep it. The average price of a new car sold in the U.S. today is roughly $34,000! Cars are rapidly depreciating assets, and avoiding the new-car carousel can make a huge difference in your financial life. Dinkytown.net has a great calculator if you want to run the numbers for your specific scenario.

Buy or Lease a Phone

There's a bit of a lull when it comes to smartphone innovation. But we're seeing a new hot pitch at many of the major cell phone carriers: leasing your phone. But is that financially savvy?

If you are with one of the major carriers and you like new phones every year or so, leasing could be your best bet. Sprint and T-Mobile offer some of the most competitive deals on leasing the iPhone; however, the rock-bottom prices you see on the commercials are only available if you are turning in a recent generation iPhone in great condition. In that case, you'll likely find that selling your phone on eBay or Gazelle will fetch you more money, even with the increased lease payments you'll be responsible for.

The absolute best financial move may be going with a cheaper phone and a cheaper service provider. No. 1 on that list would be Republic Wireless. You have to pay for your phone up front (options starting at $129), but your average bill for monthly service would be just $13.82!

In the new era of cell phone plans without contracts, finding cheaper alternatives and paying full price for your phone are sure to save you big bucks. If you just have to have the latest Samsung orApple phone, though, comb through the fine print of the lease deals you are considering. It might not be quite as good of a deal as it looks on television.

Buy or Rent Textbooks

The college textbook market is changing rapidly, and upstart websites like Chegg andCengageBrain are altering the way students think about textbooks.

The most popular model is still to purchase books at your local college bookstore and then sell them back at the end of the year. In many cases, that's not a terrible idea. The biggest wrench thrown into that model, though, is the new editions that seem to pop up far too often. There's a good chance that the book you paid a lot of money for will be worthless for the next class (and therefore unsellable) because of a new edition. Then you are stuck with a book that's worth very little.

The book might end up being worth something to you if the course aligns with your major. If you plan on using the book for reference in the future, purchasing could be your best bet. If you plan to purchase, compare prices on a website like CampusBooks.com or book.ly. They could save you a bundle over buying at the campus bookstore.

Consider using the prior edition of the textbook assigned for the class. Content and formatting changes are often minimal, while the bulk of the text remains the same.

Renting a textbook may be the cheapest up-front option. And there's a good chance that it's the option with the lowest overall cost. Just be aware of fees that can accompany book rentals. If you are rough on your books and leave stains from a Coke you were drinking, there could be extra charges. And if your textbook is lost or stolen, you could be responsible for paying the full price of the book. You could also pay more for failing to return it on time. If you are worried about those factors, buying the cheapest used book you can find might be a better option for you.

Another option to consider is CengageBrain, which allows you to buy specific chapters of a book. If you are incredibly frugal or have heard that a teacher doesn't really use the textbook much, this could be a cheap method to try. Also, consider using the prior edition of the textbook assigned for the class. Content and formatting changes are often minimal, while the bulk of the text remains the same. It just might be harder to follow along with page numbers.

Whether you are renting or buying, get the book that your teacher assigns. Use the ISBN number listed in your course catalog to ensure that you don't rent or purchase the wrong course material.

The 'Buy vs. Rent' Bottom Line

Choosing whether to buy or rent isn't easy. And specific circumstances often come into play when making those decisions. Hopefully, this guide can help you make the right choice for you and your circumstances.

This article first appeared in DealNews. 

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