Here are some key components to consider when you are weighing your options to either rent or
buy a home. Fill in the chart by placing each of the following in the appropriate box: (11 marks)
• Danger of eviction
• Less freedom to renovate
• Location flexibility
• Long-term investment
• No down payment
• Stability
• Pride of ownership
• Property taxes
• Rent increases
• Repair and maintenance costs
• Tax deductions
Advantages of Buying Advantages of Renting
Disadvantages of Buying Disadvantages of Rentin
Advantages of Buying
• Long-term investment
• Stability
• Pride of ownership
• Tax deductions
Advantages of Renting
• Location flexibility
• No down payment
• Less freedom to renovate
• Rent increases
Disadvantages of Buying
• Danger of eviction
• Repair and maintenance costs
• Property taxes
Disadvantages of Renting
• No long-term investment
• Lack of stability
• No pride of ownership
• No tax deductions
If you plan to keep the car longer than 60 months, why would purchasing the car be a better
financial decision than leasing the car? Include a discussion of equity in your answer.
If you plan to keep the car longer than 60 months, purchasing the car would generally be a better financial decision than leasing. This is because when you purchase a car, you have the opportunity to build equity over time.
Equity refers to the value of an asset that you own outright, minus any outstanding debts or loans against that asset. When you finance a car purchase, each monthly payment you make goes towards paying off the principal amount of the loan. As you make these payments, the amount of equity you have in the car increases.
On the other hand, when you lease a car, you are essentially renting it for a fixed period of time, usually between 24 to 48 months. At the end of the lease term, you have no ownership stake in the vehicle. You have essentially made payments towards the use of the car, but you do not build any equity.
By purchasing the car instead of leasing, you have the potential to build equity over time. As you continue to make payments towards the principal amount of the loan, you gradually increase your ownership stake in the vehicle. This means that if you decide to sell the car in the future, you can potentially recover some of the money you paid for it, depending on its market value.
Additionally, owning a car allows you to use it as collateral for future loans or trade-ins. This can be particularly advantageous if you need to borrow money in the future or if you want to upgrade to a new vehicle.
Overall, if you plan to keep the car for longer than the lease term, purchasing the car allows you to build equity and potentially recover some of your investment when you decide to sell it. Leasing, on the other hand, does not give you the opportunity to build equity, as you are essentially renting the car for a fixed period of time.
Advantages of Buying Advantages of Renting Disadvantages of Buying Disadvantages of Renting
Danger of eviction Less freedom to renovate Property taxes Rent increases
Long-term investment Location flexibility Repair and maintenance costs Less stability
No down payment Pride of ownership Tax deductions Less stability
Stability - Danger of eviction
- Less freedom to renovate
- Less stability
- Pride of ownership
- Tax deductions
Note: "-" indicates that the component does not apply in that category.
In order to fill in the chart, we need to determine whether each component is an advantage or disadvantage of buying or renting a home. Here is a breakdown of each component:
Advantages of Buying:
1. Long-term investment: This component is an advantage of buying because owning a home can be a long-term investment that potentially builds equity over time.
2. Location flexibility: Buying a home typically provides less location flexibility compared to renting since you are committed to a specific property.
3. Stability: Buying a home offers stability as you have a fixed place to live and don't have to worry about potential rent increases or the possibility of being asked to move out.
4. Pride of ownership: Owning a home gives you a sense of pride in being a homeowner and having the freedom to make decisions about your property.
Disadvantages of Buying:
1. Danger of eviction: Buying a home does not involve the danger of eviction since you own the property, so this component is not applicable in the context of buying.
2. Less freedom to renovate: Renting typically offers more freedom to renovate since landlords may have restrictions on what changes you can make to a rented property.
3. No down payment: Buying a home typically requires a down payment, so this component is not applicable in the context of buying.
4. Property taxes: Property taxes are a cost associated with owning a home, so this component is a disadvantage of buying.
Advantages of Renting:
1. Rent increases: Renting can provide the advantage of knowing your housing expenses in advance, as you are not directly responsible for property taxes or other costs that may increase over time.
2. Repair and maintenance costs: Renting typically relieves the tenant from the financial responsibility of repair and maintenance costs, as this is usually the landlord's responsibility.
3. Tax deductions: Renting does not typically offer tax deductions, so this component is not applicable in the context of renting.
Disadvantages of Renting:
1. Danger of eviction: Renting carries the risk of eviction, as the lease agreement may not be renewed or various other factors can lead to eviction.
2. Less freedom to renovate: Renting often comes with restrictions on renovations, as landlords have control over the property.
3. No long-term investment: Renting does not build equity over time, so this component is a disadvantage of renting.
4. Pride of ownership: Renting means you do not have the pride of ownership that comes with owning a home.
Now, you can use the provided breakdown of each component to fill in the chart by placing each component in the appropriate box based on whether it is an advantage or disadvantage of buying or renting a home.