When it comes to big discretionary items, such as vacation homes, recreational vehicles and watercraft, financial planners often counsel that it's much better to rent than to buy. That's because you incur costs only when you use it, and you're likely to use these things so infrequently that buying simply "doesn't pencil out."
Phil and Kristi Berlioz of Valencia beg to differ. They bought a half-interest in a speedboat 11 years ago for water-skiing. Given how often they and their boat's co-owner take it out, their net cost per use is about $10 to $30 a day. If they tried to rent a water-skiing boat, which is inconvenient and difficult, it would easily cost them 10 to 20 times as much.
The Berliozes' example illustrates that the economics of buying big-ticket items such as these are determined as much by disposition as by dollars.
"There's no right or wrong answer to this one," said Edward O'Hara, a fee-only financial planner with Capital Asset Management Services in Silver Spring, Md.
If you use the item frequently and over a long period, it's better to buy, regardless of whether your dream is a motor home, boat or vacation house. But too often, people think they're going to wear out the boat or jet skis they've bought, only to watch them age in the driveway.
For others, use isn't the problem--it's lust. The moment they buy the "Mini Winnie"--the 22-foot Winnebago motor home--for example, they begin to pine for the larger or updated model. Sooner or later, they sell at a steep loss and try again.
"We see people who buy vacation homes," said Ann Egan, a planner with Vision Capital Advisors in Fountain Valley. "They go for the first few years, but then lose interest, decide that it's too far away or things change.
"We have a place in the mountains like that," she admitted. "We have four families who own a place up in Wrightwood. We used to go all the time when the kids were little. None of us go anymore."
Phil Berlioz notes that several of his acquaintances have also purchased boats and jet skis, but with less success.
"They just bought the 2000, and they're already talking about what's on the 2001 model," he said. "For someone like that, renting is a better deal because they can constantly satisfy their need to be the ultimate consumer."
Indeed, the real trick to buying wisely is accurately projecting just how much you'll use the item and then taking a hard look at what it would cost to buy versus rent over its anticipated life span.
