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The Investment Coach

Opinion: Rent before you own?

As spring rolls into summer and more folks are vaccinated, the urge to “get out there” will get stronger. Watch for increased sales promotions for recreational vehicles of all types, including motor homes and campers, boats and vacation time share properties. But should you rent before you own? Unless the lure of a shiny new toy is too strong to resist, in many cases, the answer may be “yes, try before you buy!”

A March 6, 2021Wall Street Journalarticle was headlined, “Baby Bust Effects Could Last Decades.” The bottom line, “The drop in global fertility will have far-reaching consequences for business and economies.” Eighty million baby boomers were born in America from 1946 to 1964. Now between 57 and 75 years old, roughly 71.6 million are still alive. Generation X, the children of the boomers, are a smaller population cohort, now 65.2 million strong, 41-56 years of age in 2021. While we cannot quantify the impact of immigration on demand and buying patterns, a question lingers: Who will buy all of the boomer’s toys when they need to sell?

Several acquaintances got the consumer bug and bought large and beautifully equipped motor homes. It wasn’t that long before the vehicles were sold at a substantial loss. On the other hand, an old friend from Alaska recently passed through Atlanta. Unable to drive through Canada to get home due to COVID restrictions, she’s touring the lower 48 in a customized cargo van that is a compact and well-designed home. Her son helped to design and build out his widowed and energetic mom’s van. She has solar assisted battery power, refrigeration and cooking facilities, a toilet, an outdoor shower setup, a full bed, etc. It’s beautiful and economical, suited to her lifestyle.

Before you jump into a new RV purchase, fully understand all of the operating and maintenance costs, parking fees, storage fees if applicable, etc. Fuel prices are rising and “gas hogs” nibble away at your budget. How much time will you really spend on the road? How often will an expensive toy sit idle? Depreciation is a factor. A factory-fresh vehicle loses 10 to 20 percent of the purchase price the minute you exit the lot. A used vehicle in good shape, critically inspected by experts, may be a better bet. Then again, for periodic use, renting may be prudent.

My brother, a retired large vehicle mechanic for the Florida forest service, flew to Iowa to take possession of a new motor home at a factory. Traveling with several companions, he had sufficient time to drive it through the western U.S., north through Canada into southwestern Alaska, sightseeing along the way before delivering it to a rental company in Anchorage. They took advantage of free use of the vehicle without having to buy or rent.

Boats are a lure, but friends and acquaintances bitten by the boat bug have seen major depreciation on vessels at resale, as well as unexpected costs associated with an underused asset. One ex-owner opined on, “When you first get a boat, you have all sorts of dreams. You have prestige, something to show off to your pals, a whole new social world, visions of weeks floating around the ocean with not a care in the world. When you sell your boat years later, you know you are finally getting rid of that hole in the ocean that you keep pouring money into, just so you can get away for a couple of weeks a year.”

Boat rentals and yacht charters, with or without captain or crew, are available, allowing exploration of distant islands and coasts worldwide. The same goes for vacation home rentals. Talk radio ads offering to “get you out of your timeshare contract” are common.

Retirement has another trap. Just when you have money and time, health bandits may derail plans. In the post-pandemic reset, futurists see people embracing healthier lifestyles. Gerontologist Dr. Pinchas Cohen, University of Southern California, noted, “Age is the No. 1 cause of risk of mortality from COVID, but it’s not chronological age, it’s biological age.” (WSJ, 11/15/2020). Watch upscale travel magazines for increased focus on health and wellness spa vacations. A number of top tour operators offer tailored and escorted vacations in domestic and global destinations for family and/or friend groups as small as 8 to 10 people. Small ship (250-300 passengers or less) expedition cruises to exotic and visually stunning locales are on the rise.

With so many choices, so little time, why not rent and mix it up? It may be prudent money-wise and time-wise. But if ownership is preferable, go for it. Financial independence is designed to give you options and freedom.

Lewis Walker, CFP®, is a life centered financial planning strategist with Capital Insight Group; 770-441-3553;  Securities & advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis is a registered representative and investment adviser representative of  SFA, otherwise unaffiliated with Capital Insight Group. He’s a Gallup Certified Clifton Strengths Coach and Certified Exit Planning Advisor.