Buy or Rent Air ConditionerWould you buy or rent air conditioner equipment? The answer might surprise you and it really depends on the assumptions you make regarding the costs involved. The first step is to obtain several quotes for replacing your air conditioner through a purchase plan and also renting it if this program is available. Most people can do a straight line comparison of the total cost of the unit installed vs. paying monthly rental fees. There will be a break even amount at some point in the future, which could be around 10 years depending on the assumptions and the actual costs.

Don’t forget to factor in the cost of insurance for service and maintenance if you purchase your own AC unit.  If you plan to be in the home longer than this breakeven number of years, you may want to consider a further refinement of the numbers to do a proper comparison.

Buy or Rent Air Conditioner

For example, if your cost will be $5000 and you have the $5000 available, how much interest are you collecting on that $5000 today. If it is just sitting in a bank account collecting very little interest, then this next step will not be of much interest to you.

On the other hand if it is invested in something such as a stock paying 3 or 4% dividends, then you really have to factor in the lost income associated with cashing in the stock to pay for the new AC unit. Four percent will pay $200 a year for as long as you own the stock and possibly more from gains in the value of the stock as well as dividend increases.

This income will help to offset the rental cost of the air conditioning a considerable amount and move the breakeven number further out to where it might be interesting to rent instead of purchasing your air conditioning unit. Take a look at the previous post about rent vs. buying a furnace and air conditioning for a more direct example.

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