Rent vs. buy calculator

The decision between renting and buying is a crucial financial choice. Use this handy calculator to find out what decision is best for you.

Page written by Ian Hawkins. Last reviewed on May 19, 2025. Next review due July 1, 2026.

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This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out a loan.

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What is a rent vs. buy calculator?

A rent vs. buy calculator is a financial tool designed to help you evaluate the financial implications of renting versus buying a property, and assists you in making an informed decision by comparing the costs associated with renting and buying over a specified period.

What other factors should be considered?

Several factors can influence the decision between renting and buying. These factors can have a big impact on the financial outcome and should be carefully considered.

Financial stability and flexibility: Your current financial situation can greatly affect your ability to secure a mortgage. Renting offers more flexibility in case of financial changes or unexpected expenses.
Location and housing market conditions: The market in the area you’re considering can significantly influence the decision. High-demand areas may have higher property prices, making renting a more practical option.
Duration of stay: Consider how long you plan to stay in the area. If you anticipate moving within a few years, renting may be more cost-effective.
Upfront costs and down payment: Buying a home typically requires a significant down payment, which can be a barrier for some buyers. Renting usually involves lower upfront costs.
Mortgage interest rates: Interest rates impact the cost of financing a property. Higher rates can lead to higher monthly mortgage payments and may influence the affordability of buying.
Opportunity cost of down payment: The down payment used for buying a property could potentially be invested elsewhere, generating returns. This is known as the opportunity cost, and it should be considered when deciding to buy.
Market rent vs. mortgage payment: Compare the monthly cost of renting a similar property to the monthly cost of owning. This can provide a clear financial comparison.
Inflation and economic factors: Economic conditions, including inflation rates and employment stability, can impact both the market and the overall financial landscape

What are the advantages and disadvantages of buying?

When businesses consider buying assets or making purchases, they evaluate both the advantages and disadvantages. Some advantages are:

Control: Ownership of assets gives businesses full control over their use, allowing for customisation and optimisation according to specific operational needs.
Potential for long-term cost savings: Buying assets may result in lower overall costs over time compared to leasing or renting, especially for long-lived assets.
Investment potential: Certain purchased assets, such as real estate or equipment, can appreciate over time, potentially providing a return on investment or serving as collateral for financing.
Tax benefits: Depending on local tax regulations, businesses may benefit from tax deductions, depreciation allowances, or other benefits associated with asset ownership.
Strategic advantage: Owning key assets can provide a competitive edge, ensuring stability, reliability, and operational continuity.

On the other hand, some disadvantages are:

Upfront capital investment: Buying requires a big upfront downpayment, which may strain cash flow or limit financial flexibility, particularly for small businesses.
Maintenance and depreciation: Owners are responsible for ongoing maintenance, repairs, and depreciation costs related to asset ownership, impacting operational expenses.
Risk of obsolescence: Technology and market changes may make purchased assets outdated or less competitive over time, potentially leading to losses or the need for costly upgrades.
Opportunity cost: Funds tied up in asset purchases could have been used for other purposes, such as investments in growth, research and development, or working capital.

Businesses must carefully weigh these factors and conduct thorough cost-benefit analyses to determine the most suitable approach to buying assets based on their specific needs, financial capabilities, and strategic objectives.

What are the advantages and disadvantages of renting?

Businesses must consider both the advantages and disadvantages when deciding whether to rent. Advantages of renting include:

Flexibility: Renting offers businesses the flexibility to adjust their space or equipment needs more easily in response to changing circumstances or growth.
Lower initial costs: Renting typically requires less upfront capital compared to buying, allowing businesses to conserve cash and maintain financial flexibility.
Reduced maintenance responsibility: Renters are often not responsible for major repairs or maintenance costs related to the rented property or equipment, shifting these responsibilities to the landlord or lessor.
Access to prime locations: Renting allows businesses to access prime locations or facilities that are too expensive to purchase outright, improving visibility and customer accessibility.
Potential tax benefits: Rental expenses may be tax-deductible for businesses, providing potential cost savings and improving cash flow.

However, renting also comes with a set of disadvantages:

Limited control: Renters have limited control over the rented space or equipment, potentially restricting customisation or operational optimisation.
Long-term cost implications: While renting may have lower initial costs, the total rental payments over time may exceed the cost of ownership, especially for long-term leases.
Vulnerability to rent increases: Businesses renting commercial space may be subject to rent increases at the end of lease terms, impacting profitability and financial planning.
Lack of asset appreciation: Renting does not provide businesses with the opportunity to benefit from potential asset appreciation or equity buildup over time, as ownership would.

Businesses must carefully assess these factors and consider their specific needs, financial resources, and long-term objectives when making decisions about renting versus owning property or equipment.