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What is Value

An exceptionally complicating concept in finance is value. What exactly is it? Value is synonymous with worth, but that is in the eye of the beholder. Something is worth whatever you think it is worth (What is Value). The Institute of Value Management defines value as satisfaction of needs divided by use of resources. From a financial standpoint knowing the value of buying or leasing a car, buying or renting a home, and investing is a foundation to understand value. Most people seem to think that owning a home is more beneficial than renting one. If a home is owned, the owner has security, pride, etc. in their largest asset. The number one thing people see is an increasing price; hence they think a better value (Buss). However, if deflation occurs, the fair market value of their home decreases. They bought high and have to sell low. In a renting situation, the renter could have easily got out of the dilemma, while the seller of the house cannot always find an ideal buyer. Buss thinks that renting is more valuable because locking in a high price for the sale price enables them to keep their savings and liquidity dry for the time when prices are low. Just as it is better to rent a house, it is more favorable to lease a car, monetarily. Even though a car owner has limitless flexibility with his or her car, a leaser does not pay as much to lease the car (Car Buying vs. Car Leasing). Monthly car lease payments are usually lower than monthly car loan payments because you are paying only for the vehicle's depreciation during the car lease term, plus rent charges (like interest), taxes, and fees (Car Buying vs. Car Leasing). Therefore, from a financial standpoint, the value of owning a car is less than the value of leasing a car. According to The Institute of Value Management’s equation, the necessities for the desired user are greater than everything that is required to satisfy needs when leasing a car. Investing is s...

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What is Value. (1969, December 31). In DirectEssays.com. Retrieved 01:27, August 29, 2014, from http://www.megaessays.com/viewpaper/22531.html