Rent vs Buy, are you paying too much?

gnltabor
By gnltabor on Tue, Apr 5, 2016 - 8:05am

When you initially sign up for cable TV or Satellite service, the provider will install all required equipment and add a line item or two to your monthly bill for renting the associated equipment.  Items such as modems, routers, set top boxes, and remotes fall into this category and usually cost around $5.00/month for the convenience of having the item bundled into your contract.  This may be the most cost effective and flexible approach, especially if you periodically switch providers when initial teaser rates end.  Be aware however that providers will often leave that equipment in place and continue charging you rent even if newer, better models become available.  It's only when you upgrade service, change providers, or encounter a technical glitch when the provider attempts to download a firmware upgrade to that device and it fails, that you'll get a service technician out to replace it.

While in some cases, proprietary programming and/or specialized equipment may prevent you from owning the device, there are times and cases where owning your own can be a cheaper alternative, but whenever dealing with technology, make sure the payback is not more than 2 years as advancements in protocols and price/performance will create a need to replace equipment about that often.  I use Centurylink for my internet service and opted to buy their combination modem/router for $99.00 rather than rent it for $5.00/mo.  Sometime in the second year of ownership, the modem failed.  Troubleshooting it with customer service confirmed that it was dead and needed to be replaced.  Since I'd bought the unit, I had to foot the bill to replace it or convert to a rental and pick up the new unit at the local Centurylink office.  Set top boxes for TV's are similar, but with newer TV's having smart features and game consoles doubling as platforms for streaming internet content, you can eliminate some gadgets that used to be mandatory in the past.  From my experience, renting electronic accessories from the service provider makes support much simpler and avoids the potential for a surprise breakdown with resulting cash outlays.

Another situation was when I decided to provide my own trash can.  I was renting two large cans provided by the garbage service provider at $5.00/qtr per can.  Initially, I bought a cheap can for $19.95, which broke at about the time I'd reached break even.  However, that can didn't have the lift bar most garbage services now use to easily dump cans into their garbage trucks with an automatic arm, so there was more to it than just the rent versus buy decision.  My next attempt involved buying a much sturdier unit which had the lift bar in it's design.  This unit cost $69.00 on sale at Lowes and appears to be holding up as well as the rental unit after 3 years of continuous use.  Within the next 6 months, I'll have reached break even on that can and the savings begin.  If it goes the distance, I plan to buy a Recycling bin and drop that second rental charge from my bill during the next sale.

While the dollars involved don't sound like much, paying attention to the full range of expenses can reduce your monthly fixed costs over time.  Again, thinking in terms of annual expense rather than monthly or quarterly expense helps to put the charges into perspective.  $5.00/mo. is $60/yr.  of net after-tax income.  Apply the income taxes and that value is closer to $75.00 of gross income/yr.  If you're paying that for multiple set top boxes, routers, controllers, trash cans, etc. this can add up. 

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