Rent v. Buy?

The classic question "Rent v. Buy" always seemed so easy to me (ALWAYS buy, because then you're not just throwing your money away - you will OWN the asset at the end of the payments). However, recently I've come to realize that it MIGHT be smarter to rent when prices of the assets are falling (such as houses) or when dealers are dying to lease you a car and make you a better lease price than a sale price.

Turns out, it actually is complicated trying to decide whether to rent or buy something, because you have to predict the future. You have to forecast what you think the salvage price of the asset will be at the end of the term, and compare that to renting v. buying costs.

Closely related to this question is the decision of when to pay off your debt, in what order, and how much of it to pay off. The famous debt snowball worksheet helps you figure out what to do, based on the interest rates you pay.

The last thing I have to say about rent v. buy, is that there is some inherent benefit to owning stuff, instead of renting all the time - something intangible and thus, unquantifiable - but definitely beneficial.

Moral Hazard Problem

This has nothing to do with ethics, but I feel just as strongly about it as I do about right and wrong. The moral hazard problem is the idea that people will change their behavior when the costs and benefits change. For example, the classic example is car insurance. Someone who has full coverage car insurance is likely to drive a bit more recklessly, because if they get into an accident, there is no cost to them (insurance pays!) Sure, your rates may go up, but not as much as the accident cost. Thus, people drive more recklessly when they are insured, because they don't bear the full costs of doing so.
We must let people "suffer the consequences" so that they understand the options and can make the correct choices. The problem with health care in this country could be solved by making people more responsible for their health care choices, not providing FREE health care to everyone. Can you imagine what a wreck it would be if we provided free auto insurance to everyone? There would be wrecks all over the place! Similarly, if we provide free health insurance to everyone, there would be health wrecks all over the place. Got a sniffle? Go to the doctor! It's FREE! Feeling a little down? Go get some pills! They're FREE! Want to eat deep fried Krispy Kreme bacon cheeseburgers everyday until you need triple bypass heart surgery? Go ahead! It's FREE!
When you separate consequences from choices, you aren't helping anybody. Consequences are a part of learning. As one of my favorite quotes goes: "Good judgment comes from experience. And experience comes from bad judgment."