Budgeting When Should I Rent a Car? Here are five situations when you should rent a car By Miriam Caldwell Miriam Caldwell Miriam Caldwell has been writing about budgeting and personal finance basics since 2005. She teaches writing as an online instructor with Brigham Young University-Idaho, and is also a teacher for public school students in Cary, North Carolina. learn about our editorial policies Updated on August 31, 2020 Reviewed by Julius Mansa Reviewed by Julius Mansa Julius Mansa is a CFO consultant, finance and accounting professor, investor, and U.S. Department of State Fulbright research awardee in the field of financial technology. He educates business students on topics in accounting and corporate finance. Outside of academia, Julius is a CFO consultant and financial business partner for companies that need strategic and senior-level advisory services that help grow their companies and become more profitable. learn about our financial review board Share Tweet Pin Email If you don't use a car regularly, you may be wondering whether you should rent a car when the need arises or buy a car of your own. Renting a car regularly can be expensive. But going car-free and renting only periodically—for the odd road trip, for example—can sometimes be more cost-effective than buying a new car. Another option is to rent a car occasionally and buy an inexpensive used car to rely on the majority of the time. With the right planning, you may be able to save a significant amount by renting a car. Read on for five scenarios when you should rent a car instead of buying one. 01 of 05 You Live in a Big City Rodrigo Kraljevic/EyeEm/Getty Images If you live in a large city with excellent public transportation, such as New York City, Boston, or Chicago, there may be no need for you to buy a car; you can take care of your daily needs within the city via public transportation. In fact, in New York City, more than 100,000 people share only 2,000 cars. In many cases, public transportation may be more efficient than trying to drive a car in traffic. Since public transit conserves land, encourages mixed-use development near transit stations, and promotes ride-sharing, it often reduces the distance, time, and fuel it takes to reach your destination. If you plan a road trip or need a car for a day in such a city, renting a car occasionally can be cheaper than buying a car. For example, a one-day compact car rental in Boston in February 2020 can run you around $58 at Thrifty Car Rental or $56 at Enterprise; multiply that by 12 to get an approximate yearly cost of under $700. The average compact car costs a whopping $22,000 as of January 2020. If you add the cost of car insurance, paying for a parking permit or parking meters, and a designated parking space in addition to your rent, it may not make sense to own a car at all. 02 of 05 You're Taking a Road Trip Road Trip. Photo by Lisa Gagne/Getty Whether you're traveling to the next city or the next state, renting a car can make the journey easier by sparing you the hassles of driving a car you own and saving you money over a flight. This may be a good idea if you do not own a car, the car you have is not very reliable, or your car is capable but you would prefer to put the mileage on another vehicle. It's common for companies to provide what is known as a collision damage waiver; if you pay for this coverage and get into an accident during the road trip, the company will file your insurance and foot the bill for the repair without causing your personal insurance premiums to increase. It can be fun to choose a new or a different car model than what you are accustomed to driving; you can treat the rental as an extended test drive while on your road trip. This can help you make a more informed purchase when you decide that it's time to buy a car. You can potentially save money on these rentals via a motor club such as AAA, a professional organization, or alumni associations. Also considering booking a car through a travel website or bundling your hotel and airline tickets to find deals. Be aware: It's more expensive to rent a car when you are under 25 years old, so budget a little extra when evaluating the cost of renting a car versus buying one if you're under this age. 03 of 05 You're on Vacation Hero Images/Getty. People often think of renting a car once they get to a vacation destination that they flew to, which can be a useful option if you're traveling to a spot where you don't know anyone else and therefore can't easily borrow a car. Many car rental companies provide roadside assistance, which means you'll have the added protection of the rental company helping you out if the car were to break down on the road in an unknown location. Renting a car instead of using one you bought is a particularly worthwhile option if there are several people you are traveling with and you will not all fit into one car. Alternatively, you can rent a large van to travel together and split the cost. 04 of 05 You're Running Errands Kali9/Getty Images Car-share programs at car rental companies such as Enterprise give you the ability to rent a car by the hour, making it easy to forgo buying a vehicle and simply rent one when you need to run errands. This option makes sense if you don't drive enough to justify buying a car, but you cannot find a truck or large car to regularly borrow from a friend. For example, you could designate a half-day or day every week, or even just a weekend every month, to carry out all your administrative tasks, such as going to a grocery store, post office, bank, or gym. Likewise, rent a car to buy a large, one-off item, such as a television. This option could wind up being cheaper than paying to ship a large item to your home. To increase the money-saving potential of this arrangement, split the cost of the rental with friends if you have several people who need to run errands at a time. By coordinating your efforts, you can all save money and help each other out. 05 of 05 It's a Special Occasion Hinterhaus Productions/Getty Images. Hinterhaus Productions/Getty Images For special occasions, consider renting a car as an upgrade to the older vehicle you may own. For example, if you are planning to propose or you are attending a classy event, and your current clunker will not cut it, rent a car for the day instead. Renting a car occasionally during the year could save you money compared to buying a luxury automobile to use every day. For example, a two-day luxury car rental in New York City in June 2020 would cost around $202 at Thrifty Car Rental and $227 at Enterprise. Buying an average entry-level luxury car costs $40,000 as of January 2020. If you rent through a car service, look online for a Groupon deal or an event discount. These discounts may qualify your guests for reduced rates on rentals for occasions such as weddings or family reunions. Updated by Rachel Morgan Cautero. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. U.S. Department of State Bureau of International Information Programs. "Does Everyone in America Own a Car?" Page 2. Federal Transit Administration. "Transit’s Role in Environmental Sustainability." Enterprise. "Choose a Vehicle Class." Thrifty Car Rental. "Car and Rate." Kelley Blue Book Co. "Compact Cars." Avis. "What Is Rental Car CDW Insurance?" Federal Trade Commission. "Renting a Car." Enterprise. "What Should I Do If My Rental Car Breaks Down?" Enterprise CarShare. "Hourly Car Rental for Lives on the Go." Kelley Blue Book Co. "Luxury Cars: Midsize Segment." Hertz. "Choose Hertz for Special Events...Weddings, Family Gatherings and Reunions."