Renting or buying a car: how to do the maths properly

Comparing the instalment of a loan with the monthly fee of a rental almost always leads you astray. The two numbers contain different things. To decide well you need a comparison of the total cost of the whole period of use.

What to include in the buying calculation

• price of the car and interest on any loan;
• third-party insurance and optional cover, year by year;
• road tax;
• servicing, tyres and repairs outside warranty;
• depreciation: the difference between what you pay for the car today and what it will be worth when you resell it.

Depreciation is the item most often forgotten and is often the heaviest in the first years of the vehicle's life.

What to include in the rental calculation

• deposit, if required;
• monthly fee multiplied by the months;
• any additional services;
• excess mileage or damage beyond normal wear and tear at the end of the contract.

When rental tends to pay off

• if you want to change car every 3-4 years;
• if you prefer a predictable monthly expense;
• if you don't want to tie up capital;
• if you don't want to deal with insurance, maintenance and resale.

When buying tends to pay off

• if you keep the car for a long time, even 8-10 years;
• if you drive very few miles and are happy to handle the management;
• if you already have the funds and resale doesn't bother you.

A three-step method

1. Estimate how many years you will use the car and how many miles you will drive.
2. Add up all the buying costs over that period, including depreciation.
3. Compare them with the total cost of the long-term rental for the same services.

A RentalZone consultant can make this comparison with you on the models you are interested in. Request a free consultation.