Rent vs Buy Calculator
This is an opportunity cost calculator. It assumes that both the renter and the buyer spend the exact same amount of money and compares the opportunity cost of buying vs renting. The comparison is input equated based on the annualised cost of ownership, so the rental investment amounts are calculated as annual cost of ownership minus rent.
Regular readers will know I sat on the fence for a long time concerning the “rent vs ownership” debate when it comes to a place to live. In my guts I think rent best suits the Escapologist: it’s temporary, it involves less responsibility. In recent reality, I’ve come to accept the modern rental market as part of The Trap and I finally came out (reluctantly) in favour of ownership in Issue 17.
But it shouldn’t come down to feelings or morals really. It’s an economic question.
So here, I have found, is a new calculator to help answer the question.
Pleasingly, it was designed by Herman, the fellow behind Bearblog, which I recommended in the “Old Web” column [also] of Issue 17.
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About Robert Wringham
Robert Wringham is the editor of New Escapologist. He also writes books and articles. Read more at wringham.co.uk
If you want to really get into the weeds on this topic, Ben Felix on youtube has a few videos on rent v buy that covers it pretty well. In the end, renting is usually the mathematically ideal way to go if you invest the difference. However, that last bit of investing the difference is a massive hurdle for us humans. For most people, the forced savings that happens with a mortgage is much more likely to build wealth over time compared to renting due to the discipline required. Even with automatic contributions, it’s easy to reduce those due to some “just this once” reason.
On the other hand, owning a home makes us more likely to spend more on the home to make it the way we want. We also fall into the trap of justifying these upgrades by assuming we’ll get at least as much money back in home equity. At least with a rental, it’s unlikely we’re going to spend thousands on a kitchen or bathroom renovation. Also, due to high transaction costs of selling a home, owning for less than around 9 years before moving can be very expensive.
The outcomes of each option is similar enough that it really does come down to feelings, in a way. Much to the chagrin of economists, we’re not perfectly rational economic actors. Some people truly would be happier with one over the other even if, in practice, they are identical or the other option is better overall. Of course they could also learn to overcome these biases that are limiting them to one choice, but if they’re similar enough, is it worth it? I don’t know.
Side note, but I’ve just bought a home after wanting to rent for my entire life. The main thing that led me to this was that the house was a setup that I really valued, but I could not find a way to rent my way into that situation. I’m not saving anything over renting, but I’m excited to live in a way that I’ve been dreaming of for a long time.
Brilliant comment. Thanks. I’ve promoted it to “letter” status so our readers will actually see it: https://newescapologist.co.uk/2025/07/16/letter-to-the-editor-were-not-perfectly-rational-economic-actors/
Oh cool, I’m honored! Thank you for doing what you do.