Author: Heather Vale
November 27, 2023
There’s a definite shift towards the rental economy. Find out why renting is becoming the new purchasing, and whether this trend will continue.
We’ve all heard of renting a car, an apartment, or even a tuxedo. But did you know you could rent just about anything, from machinery and equipment to fashions and handbags?
While it used to be commonplace to purchase everything you need, there’s been a shift lately to renting. People are renting bicycles, scooters, sports equipment, furniture, cameras, tools, boats, trailers, home appliances, computers, gaming systems, clothes, and accessories like jewelry. And that’s just the tip of the iceberg.
But the rental trend goes way beyond tangible things. When you “rent” something that’s not a physical item, we often call it a subscription. That includes streaming entertainment and software as a service (SaaS). You want to watch a movie, but it’s not available on your platforms? Or maybe you want to edit a video of your birthday party but don’t plan to create anything after that. Well, you can sign up for a channel or a piece of software when you need it, pay for a month or two, and then cancel it.
The rental economy refers to a new type of relationship with products and brands. Instead of buying something you’ll only use a few times, people are gravitating towards renting it for a short period and saving the rest of the money.
As inflation makes items more expensive to buy, it becomes even more appealing to rent them instead. Then you don’t need to worry about long-term storage, maintenance, upkeep, or anything else that goes along with caring for a possession.
This modern trend picked up steam when millennials were younger. In the early 2000s, many of them were starting careers and at the age where their parents or grandparents might have purchased homes. But the housing market was starting to fall, and student loan debt was high, so it didn’t make sense for a lot of them to buy real estate. Renting required less money and less commitment.
Plus, this generation was used to renting DVDs through the mail or from the corner store, so the model easily spilled over into other products. If you can experience wearing a luxurious designer dress or diamond necklace by paying just a small price of admission, and then change your mind and get something different for the next weekend, it opens up a whole new world of variety and flexibility. It’s like having everything the rich and famous do without having to pay full price for any of it.
Renting has plenty of advantages over purchasing items outright. The reasons for its rising popularity range from financial to emotional.
As long as you’re not renting long-term, you’re almost guaranteed to save money by renting over buying. You can use the item when you need it, and not worry about it when you don’t. That’s a much more efficient arrangement than buying something, using it a few times, and then letting it collect dust in your garage or attic.
The rental economy supports sustainability and conscious consumerism by reducing waste and cost. If you don’t use something and end up throwing it out, you might as well be throwing out the money you spent on it as well. Plus the item sits in the landfill, not doing anyone any good.
However, if you rent an item, you just send it back or end the contract when you don’t need it anymore. Someone else gets to enjoy it when they rent it next, and the item can be used hundreds of times instead of just a few. On top of that, you haven’t wasted anything beyond the rental price. And in many cases, the cost of renting is just a small drop in the bucket.
This model is especially appealing to younger spenders like Generation Z, who tend to value the environment and sustainability over consumerism.
While previous generations grew up craving the pride of ownership, younger consumers often prefer experiences. It’s not important to own a motorboat when you really just want to feel the wind in your hair and the splash of the waves as you hang out with your crew of besties. It’s about having fun with your friends, not hauling around a boat and finding somewhere to store it.
Renting something means somebody else is responsible for the mundane stuff like keeping it in good condition, repairing, storing and transporting it. You just come along, enjoy it for a bit, and then move on to the next adventure.
But sometimes it’s not an either-or scenario. People will often rent something to see if they like it before making a purchase decision. If the product passes the rent test, the consumer will buy it later.
It seems like you can rent almost anything, but some industries have shifted more than others.
These options allow people to access new things without the burdens of ownership. Sometimes it’s a matter of wanting financial flexibility to deal with economic uncertainties, and other times it’s about minimalism and an experience-centric lifestyle where the journey outweighs the destination.
Still other times it’s about environmental consciousness and not committing to car ownership or stockpiling belongings that just end up in landfill. Often the younger generations are concerned about these issues, which have all contributed to the growth of the rental economy.
Of course, everything has pros and cons. Renting means you could end up paying more than the purchase price, and you don’t even have an asset to show for it. Plus you’re reliant on other people continuing a service without raising prices.
If you don’t own what you have, you’re not building equity or assets. If you own your house or your car, you can sell it later and pocket the proceeds; but if you rent it, the money is going out with nothing to show for it in the end.
Paying for things without building equity could lead to extra debt, and that could in turn impact your credit score. But on the other hand, making regular payments can boost your score. So it’s more about your behavior and habits than the rental economy itself.
In fact, some credit cards are designed for building or rebuilding credit, so using them for a rental and then paying it off is a great way to establish positive credit history. But before choosing a card to apply for, it’s important to consider which one is best for you.
Another drawback to renting is that you’re relying on somebody else to keep providing the product or service. Countless people have found themselves needing to find a new home because their landlord raised the rent or decided to live there themselves.
And the same thing goes for any type of rental. You’re not in control, so you’re at the mercy of the owner’s decisions. That includes price increases, offer changes, or even discontinuation of the service altogether.
Beyond the necessities like a place to live, renting things is largely about instant gratification. You don’t need to save up for something expensive as long as you have the rental fee, and you can rent most products anytime you like.
It’s challenging to predict the future of the rental economy, but there’s no reason to expect it to end. As current younger generations grow older, they’re not likely to abandon their preference for temporary experiences over long-term ownership. Someone who moves from city to city working different jobs isn’t going to keep buying couches and kitchen appliances — or moving them long distance — if they can just rent those things for a year. Even if it costs more over time.
Of course, there’s a chance that growing up means settling down, as it did for the hippies of the ‘60s who became yuppies in the ‘80s. If that happens with Gen Z, trends will probably shift based on the preferences of the new younger consumer of the time.
Factors that affect this will include not just generational preferences, but economic and environmental conditions. The more minimalism and sustainability efforts are embraced, the more the rental economy will flourish. But trends tend to cycle, and pendulums always swing the other way. So it’s possible that renting becomes less popular over time.
If the housing market is an indicator, rental rates have continued to rise. But so have real estate prices, meaning rentals will continue to flourish in at least one area. Not only that, but the post-pandemic increase in remote work has led to a bigger demand for home rentals overall. People who may have been happy to live with roommates in the past now want their own space, and those who were happy in smaller apartments now want bigger ones. That trend won’t likely reverse in the near future.
So when it comes to deciding between renting and buying, which is the better choice? Just because something’s trending doesn’t mean it’s right for you. Often it’s not a simple decision, and there are many complexities involved.
For inexpensive items, renting might not make sense. But the more expensive something is to buy, the more likely you’ll want to rent it instead. Why buy a $2,500 camera lens when you only need to use it for one shoot and can rent it for less than $100? If you’re hosting a graduation party or wedding in your backyard, there’s no point in buying 200 chairs outright — but renting them is a great solution. And if you want to take a boat out on the lake for a day, there’s no reason to come up with thousands of dollars. You can usually rent one right at the edge of the water.
However, there’s a tipping point. If you rent something for long enough, it can end up costing more than just buying it … especially since owning it means you could potentially sell it later. Sure, paying a little every month instead of a bunch all at once is more convenient and seems easier on the wallet. But the same type of arrangement can be had with various forms of financing if you do decide to purchase. If the issue is truly about sustainability, selling your item on the used market is just as environmentally conscious as renting it.
Like with anything, knowledge is power. In this case, cultivating your digital financial literacy skills can help you make the best personal financial decisions for yourself. And of course, weighing the pros and cons, and even doing a cost analysis over time, can be extremely helpful as well.
About the author:Heather Vale
For over a quarter of a century, Heather has been working as a journalist in all media: TV, radio, print, and online. After establishing her career in Toronto, she has been living, working, and playing in Las Vegas for the past decade. She loves pulling apart complicated topics to make them simple, fun, and easy to understand, especially in the business and financial niches. But she also enjoys writing about the personal side of life, including success, relationships, families, and pets. She approaches everything from a yin-yang perspective, so her passion for wordplay and entertaining metaphors is always balanced with an intense (and some would say annoying) focus on facts and accuracy.
This material is for informational purposes only and is not intended to replace the advice of a qualified tax advisor, attorney or financial advisor. Readers should consult with their own tax advisor, attorney or financial advisor with regard to their personal situations.
While most rental car companies will let you settle your bill in cash when you return the car, some will not let you reserve a car with a cash deposit at the beginning of the rental transaction. Other rental car companies may let you rent a car with a cash deposit, but you will most likely have to clear multiple hurdles first—providing proof of insurance, showing a paycheck stub, filling out an application and possibly paying a fee, providing copies of utility bills, and more—plus, you may have to pay the entire cost of the rental up front.
One of the upsides of renting is that you are not responsible for the building, property, or any related structures on the property—other than damage you may inflict—because you are not the owner of the property. The landlord is responsible for these and would typically insure it through a homeowners insurance policy.