Author Topic: Doesn't everything you buy depreciate faster than cars depreciate?  (Read 10800 times)

Nick_Miller

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Doesn't everything you buy depreciate faster than cars depreciate?
« on: September 19, 2016, 02:12:23 PM »
I know Dave Ramsey and others focus (like a laser) on how cars are the biggest item you will buy that goes down in value. Okay, I get that.

But a recent thread (that I can't find at the moment) talking about the amount of non-investment assets got me thinking...(which is a dangerous thing!)..."Hey, what about alllllll the other crap we buy? That's actually a lot more expensive than a car, AND it all depreciate MUCH more."

For example, let's say you buy a 2010 Toyota something or other for about $10,000. In five years, assuming you take decent care of it, you might be able to get $5,000 in private sale (50% reduction).

But all (nearly) all other consumer goods fair even worse.

Take that brand new $1,200 leather sofa you just bought. Do you really think you could get $600 for that in 5 years?? I don't see that happening. People would be trying to buy it for maybe $200 tops.

And what about that $800 dining room table? MAYBE $150 in five years. Probably more like $100.

And that "must have" new handbag for $300. You probably couldn't get $20 for it in five years.

Computers are even worse. Those things become worthless in what, 3-4 years?

So yes I get that cars are the biggest consumer item that loses value, but since they hold up better than nearly everything else, and that "everything else" can get to be quite costly, when you factor in furniture, clothing, electronics, sports equipment, appliances, etc., isn't the more powerful economic message "Only buy crap when absoooooolutely necessary, and then, be one of those people on Craigslist buying the formerly $800 dining room table for $100?




Us2bCool

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #1 on: September 19, 2016, 02:18:44 PM »
I think the point is that most people finance cars and pay them off according to the schedule that the lender gives them, meaning at any given time you are underwater on your car. I know a lot of people finance furniture, but I like to think that most people who are willing to finance a car will pay cash for a sofa.

The key, in my opinion, isn't necessarily to pay cash for all your cars, but to recognize that cars don't keep their value and treat the loan accordingly. Postpone your purchase until you have a decent down payment, buy slightly used and pay it off as soon as possible.

undercover

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #2 on: September 19, 2016, 02:23:55 PM »
What about that $10 plate of food at a restaurant? It literally turns to shit in about a day.

It's not that cars are the only worthwhile thing talking about - it's that cars are the largest frivolous expense that most people have. Even the people that are financing new $35k cars every 2-3 years are not necessarily buying new furniture or other things in that amount of time. And there's a good argument that having a nice car influences extravagant spending in other areas, since a lot of materialistic folks hold their car as their "identity".

Lots of electronics hold their value well. Nearly all Apple products do.

nereo

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #3 on: September 19, 2016, 02:26:39 PM »
Also, if you are purchasing a 2010 toyota for $10k and selling it five years later for $5k you are already doing much better than the typical US consumer, who purchases a new car with financing, then uses that as a trade in several years later.  IN that case they may 'buy' a 2017 model for $25k, pay $30k (or more) with financing and then trade it in for $10k five years later, for a grand loss of $20k or $4k/year.

In comparison, very few people spend $4k every year on any other budget item (furniture, electronics, etc.). Those that do are often driving cars that are way more expensive than the one quoted above. Hence why there's such a laser-focus on cars among these sites.

You are absolutely right that we ought to pay attention to those other categories as well.  Smart phones are another easy target; So many people buy a new phone every 2 years and have the price rolled into the contract at $80-100/mo (which is really ~$1k every year), when they could get something similar for less than half.

mizzourah2006

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #4 on: September 19, 2016, 03:14:50 PM »
I would argue that homes depreciate in value as well. The land you own is appreciating in value, but the home itself, not so much. I always use this thought experiment.

There are 2 homes on identical plots of land sitting right next to one another. They were both built in 1975 and have identical floor plans. One was remodeled in 2010, the other is completely original. No work has been done. If homes appreciate in value they should both go for around the same price.

Jack

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #5 on: September 19, 2016, 03:29:19 PM »
Half the furniture in my house is (much) older than I am. I expect that it'll eventually sell for more than I paid for it, or at least the same after adjusting for inflation.

Good furniture quits depreciating and becomes "vintage" instead. The best time to buy is just before that point.

marty998

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #6 on: September 19, 2016, 03:37:54 PM »
Cars have further costs like petrol, insurance, rego etc.

Couches do not. (ok maybe obesity related diseases).

englishteacheralex

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #7 on: September 19, 2016, 04:03:09 PM »
Well, yeah. Duh. That revelation is one of the gateways of frugality. Dave Ramsey addresses cars, but Mustachians apply it to everything.

This is why we never buy anything new. Unless it's something fully consumable as a one user item, like underwear. Or it's something that we need immediately and it has to be exactly a certain way--bespoke, possibly, or just very specific.

What I've come to appreciate about craigslist/estate sales/garage sales/etc. is that you generally substitute depreciation for hassle factor. If I want something specific, it's always going to take less time and less hassle to just go to Target and buy it. Sometimes that's worth it to me, but not very often.

Most stuff I want/need can be postponed until I find the used version, and it doesn't have to be perfect. The better I get at frugality, the more stuff falls into this category.

Turnbull

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #8 on: September 19, 2016, 08:04:53 PM »
We hardly ever buy anything new either, and recently I saw the effects of depreciation on CL.

I had some microwaves that had been sitting in my basement for years that I had collected cleaning out our rental houses. I cleaned them up and put them on CL for something like $20-25 and got NO interest. These were clean microwaves in perfectly fine working order. I let the listings sit there forever with no bites and eventually just gave them to Goodwill.

2527

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #9 on: September 19, 2016, 08:10:36 PM »
I think a key point is to not buy a bunch of stuff unless you really plan to use it. 

mpg350

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #10 on: September 20, 2016, 06:15:56 AM »


I usually buy used when I can but some things I would not buy used…like a couch unless it was in really good shape which isn’t often ot underwear/socks/shoes and maybe some other things that are just hard to find used.

For instance I bought a used $250+ baby jogging stroller for $50 and used for a year then we sold it for like $70.

ender

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #11 on: September 20, 2016, 06:27:24 AM »
Sure, they do. But you lose a lot less money per item and don't lock your spending for 5-7 years when you buy a computer, for instance. None of the other items on your list come close to the single-handed impact a vehicle does.

Making a mistake with a car purchase can easily be $5k lost in a few months at the cost of close to zero down payment. Most things on your list don't even total that, so assuming they were purchased, still won't implode your life. Additionally many (but not all) other items are not as easily financed as cars.

Also, some computers do hold value decently well - I sold a 5.5+ year old Macbook Pro I had purchased for around $1100 for $400.

The reality is, you are technically right, but from a practical perspective, people make bigger single mistakes on cars than any other item, which means it's a good focus point for personal finance people.

I would argue that homes depreciate in value as well. The land you own is appreciating in value, but the home itself, not so much. I always use this thought experiment.

There are 2 homes on identical plots of land sitting right next to one another. They were both built in 1975 and have identical floor plans. One was remodeled in 2010, the other is completely original. No work has been done. If homes appreciate in value they should both go for around the same price.

That's a bad example. Appreciating in value doesn't mean that adding improvements/upgrades cannot increase value. Likewise, it does not mean immunity to neglect.

If homes appreciate in value, both should sell in 2010 for more than they were purchased for - not the same price.

Take that brand new $1,200 leather sofa you just bought. Do you really think you could get $600 for that in 5 years?? I don't see that happening. People would be trying to buy it for maybe $200 tops.

This is a good example. My wife and I recently bought fairly close to matching black leather furniture on Craigslist piecemeal, but spent $600 total for 3 couches, a loveseat, and a recliner. Brand new ones would have cost us close to 10x the difference.

Furniture drops like a rock. You just need to browse your local Craigslist to see tons of postings like, "Bought from <name brand store> 2 years ago for $1k, selling for $300!" types of things.

HenryDavid

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #12 on: September 20, 2016, 06:59:58 AM »
These things don't:
-quality musical instruments
-art

Jack

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #13 on: September 20, 2016, 08:19:27 AM »
These things don't:
-art

Art goes in and out of fashion instead.

ender

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #14 on: September 20, 2016, 08:23:08 AM »
These things don't:
-quality musical instruments
-art


Citation needed?

Some cars don't depreciate, too, and actually appreciate. That doesn't mean all cars appreciate.

No Name Guy

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #15 on: September 20, 2016, 08:30:13 AM »
Lots of electronics hold their value well. Nearly all Apple products do.

Ha ha ha ha ha ha.....dude (or dude-ette) you're killing me.  Tell us how that iCrap 4 is the same price as it was when new.

More generally, I'd say to the OP, no, not everything.  While a hotly debated topic here, quality firearms (e.g. a Browning over-under shotgun, S&W revolver, high quality bolt action hunting rifle, etc) hold their sale price value if well cared for and ascetically clean. 

While not with respect to new sale price, when it comes to functionality at least, quality tools & cookware functionally hold their value - my 25 year old set of ratchets, sockets and box wrenches are just as functional as the day they were purchased.  Ditto the miter saw.  And the same goes for some cookware I got from my parents - those pots and pans are 50-60 years old now.  But those are more BIFL items that would be available at a discount to new price on a used market, which is (admittedly) a different point that the OP was bringing up.


nereo

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #16 on: September 20, 2016, 08:36:46 AM »
Lots of electronics hold their value well. Nearly all Apple products do.

Ha ha ha ha ha ha.....dude (or dude-ette) you're killing me.  Tell us how that iCrap 4 is the same price as it was when new.

Why all the hate, no name guy?

It's worth noting that depreciation only matters when the owner plans on selling hte item.  Cookware, firearms, tools, etc might hold their value very well, but if you never sell them, the resale value is moot.
Edited to correct spelling (thanks Jack)
« Last Edit: September 20, 2016, 09:19:28 AM by nereo »

Goldielocks

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #17 on: September 20, 2016, 08:45:31 AM »
These things don't:
-quality musical instruments
-art

Bought a trombone for $90 three years ago, sold last week for $145, including the extra small dent.

If you buy already used, depreciation is built in. No more for you to cover.

Like others said, cars have a much larger dollar value of depreciation. Few items lose so much $ after a few years.


nereo

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #18 on: September 20, 2016, 08:49:18 AM »
These things don't:
-quality musical instruments
-art

Bought a trombone for $90 three years ago, sold last week for $145, including the extra small dent.

Some paid you $55 to dent a trombone?  cool.  Reminds me of hip "reclaimed simulated barnwood/distressed" furniture today...

Nick_Miller

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #19 on: September 20, 2016, 08:55:15 AM »
Sure, they do. But you lose a lot less money per item and don't lock your spending for 5-7 years when you buy a computer, for instance. None of the other items on your list come close to the single-handed impact a vehicle does.

Making a mistake with a car purchase can easily be $5k lost in a few months at the cost of close to zero down payment. Most things on your list don't even total that, so assuming they were purchased, still won't implode your life. Additionally many (but not all) other items are not as easily financed as cars.

Also, some computers do hold value decently well - I sold a 5.5+ year old Macbook Pro I had purchased for around $1100 for $400.

The reality is, you are technically right, but from a practical perspective, people make bigger single mistakes on cars than any other item, which means it's a good focus point for personal finance people.

I would argue that homes depreciate in value as well. The land you own is appreciating in value, but the home itself, not so much. I always use this thought experiment.

There are 2 homes on identical plots of land sitting right next to one another. They were both built in 1975 and have identical floor plans. One was remodeled in 2010, the other is completely original. No work has been done. If homes appreciate in value they should both go for around the same price.

That's a bad example. Appreciating in value doesn't mean that adding improvements/upgrades cannot increase value. Likewise, it does not mean immunity to neglect.

If homes appreciate in value, both should sell in 2010 for more than they were purchased for - not the same price.

Take that brand new $1,200 leather sofa you just bought. Do you really think you could get $600 for that in 5 years?? I don't see that happening. People would be trying to buy it for maybe $200 tops.

This is a good example. My wife and I recently bought fairly close to matching black leather furniture on Craigslist piecemeal, but spent $600 total for 3 couches, a loveseat, and a recliner. Brand new ones would have cost us close to 10x the difference.

Furniture drops like a rock. You just need to browse your local Craigslist to see tons of postings like, "Bought from <name brand store> 2 years ago for $1k, selling for $300!" types of things.

Yep I understand that cars are frequently the biggest mistake people make. I was just trying to point out that Dave Ramsey and others should also preach against buying new furniture, buying new computers, buying new tools, buying new appliances, etc. etc. Most all of it plummets in value once it's no longer new, meaning you take the same huge depreciation hit on your new fridge (percentage wise, not $ wise) as you do on that new car.

And it's REALLY easy for people to get sucked into the "Oh we must furnish the whole house in decorator items." When you count things like rugs (can be VERY pricey), living room sets, big screen tvs, etc., it REALLY adds up. We knew a couple that drove reasonable cars, had a reasonable house (for their income), but when you stepped inside it was like the Ashley gallery. I'll bet the living room package set them back $7,500.00.




nereo

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #20 on: September 20, 2016, 09:04:00 AM »

Yep I understand that cars are frequently the biggest mistake people make. I was just trying to point out that Dave Ramsey and others should also preach against buying new furniture, buying new computers, buying new tools, buying new appliances, etc. etc. Most all of it plummets in value once it's no longer new, meaning you take the same huge depreciation hit on your new fridge (percentage wise, not $ wise) as you do on that new car.
...

Ok, sure.  Of course.  One of the criticisms that I have of DR is that his advice is too simplistic and often aimed more at changing behavioral responses than doing what's financially optimal.  It works great for someone who's drowning in debt or who has a financial literary score of 0-1 (out of 5). This site, bogelheads, etc. focus more on advanced issues. 
I'm pretty sure you'd get some virtual face-punches around here if you furnished a new home with new appliances and furniture unless you were already FI... even then there'd be some ribbing for 'wasting' your money on paying too much for an item.

MMM has written several blog posts about scoring appliances and home goods on craigslist, contractor sites, etc.

Jack

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #21 on: September 20, 2016, 09:12:00 AM »
...if you never sell them, the resale value is mute.

All values are mute (because abstract ideas cannot produce sound). In this case, the resale value is also moot.

nereo

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #22 on: September 20, 2016, 09:19:45 AM »
...if you never sell them, the resale value is mute.

All values are mute (because abstract ideas cannot produce sound). In this case, the resale value is also moot.

oy... my bad.

undercover

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #23 on: September 20, 2016, 09:26:20 AM »
Really, PF is about one thing: savings rate. All the little tips/tricks like riding a bike, ditching the dryer, buying used, wearing the same clothes, etc, come after learning that the only way to get ahead is to seriously drop your expenses or seriously raise your income.

I agree that zeroing in on cars is not necessarily useful to someone who is totally serious about saving money - but it gets people thinking about other areas in their life that they're overspending on. If you've purchased one new car, you're very likely to do it again, regardless of your other habits. So the car(s) are going to add up to be the largest expenses when compared to other things like upgrading phones, buying clothes, etc.

But really, MMM could've started the blog at "savings rate" - fleshed that out a bit, and dropped the mic. Because when you see the math behind savings rate and know that you want to become FI, you will find every way possible to reduce expenses and increase income. So yeah, I definitely agree that cars aren't the only thing to focus on since it's only part of the pie. The whole pie is your income - expenses = savings rate.

Bakari

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #24 on: September 20, 2016, 09:45:17 AM »
There was a lot of posts to skim, and I'm pretty sure someone already pointed out that new cars are usually more than $10,000 (the average is 3 times higher).
But good lord, do people really pay $10,000 in random household goods?  $1,200 for a sofa?  That you then replace in 5 years?  No wonder the middle class is "struggling"!  Also the popularity of IKEA

I realize I'm an outlier, but I think the grand total of everything in my living room cost less than $200 (TV from a garage sale, N64 from GameStop, Roku from Amazon, DVD player from craigslist).  All the furniture was from various hauling runs (sometimes I charge people to take away stuff they don't want anymore), craigslist free section, or stuff friends or family didn't want anymore.


Anyway... even with leather sofas and big screen TVs, I think its going to be challenging to add up to $30,000 every 5 years
Even if they did, it doesn't really seem like a fair comparison to look at one single giant expense that does just one thing to dozens or hundreds of different smaller things that do dozens or hundreds of different things.

But, yes, people waste money on stuff representing status on many ways, and they all add up to keeping potentially wealthy people poor

Jack

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #25 on: September 20, 2016, 10:04:44 AM »
But good lord, do people really pay $10,000 in random household goods?  $1,200 for a sofa?  That you then replace in 5 years? 

I would pay $1200 for a sofa (I actually paid ~$900 for mine, bought new), but I would also expect it to still be in nearly-new condition after five years and still in good condition after 20+ (assuming I kept pets or kids from abusing it).

No Name Guy

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #26 on: September 20, 2016, 01:33:31 PM »
Lots of electronics hold their value well. Nearly all Apple products do.

Ha ha ha ha ha ha.....dude (or dude-ette) you're killing me.  Tell us how that iCrap 4 is the same price as it was when new.

Why all the hate, no name guy?

It's worth noting that depreciation only matters when the owner plans on selling hte item.  Cookware, firearms, tools, etc might hold their value very well, but if you never sell them, the resale value is moot.
Edited to correct spelling (thanks Jack)


No hate fan boy (cause only an Apply fan boy would get up in arms over the phrase iCrap). 

I use the term "iCrap" for pretty much all overpriced, planned obsolescence mass market consumer electronics, regardless of who makes them.  Now, if someone comes up with an equally catchy phrase for Andriod or the other OS phones, tablets, etc, hey, I'll throw that one around as well.  You have one?  Crap-droid, An-trash, Win-Duh's, Micro-Crap, etc

I laugh every time a new phone comes out, as there are millions of people (a family member used to be one of them) that would run out and get them within a month or two of their appearance.  Never mind that their current device is perfectly functional and has far more computing power than the best computers from my childhood. 

I'm still using the same old phone (works fine) from '09 and it's not an iCrap, An-Turd, nor Micro-Trash OS brand, so I don't have a dog in the metaphoric fight and could really care less.  When it comes time to finally replace it, I'll go with something that is actually functional for my needs, and not a hype based product.

You're right though when it comes to resale value only mattering if an item is intended to be sold at some point.  I happen to BIFL on what little I buy (see my previous comments).  I like the way Jacob at ERE more or less uses Craigslist to "rent" things he needs - buys used, already depreciated items, for a particular project or need, then resells them when said project or need is done, recouping, on average, all his cost.

iris lily

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #27 on: September 20, 2016, 01:41:42 PM »
Half the furniture in my house is (much) older than I am. I expect that it'll eventually sell for more than I paid for it, or at least the same after adjusting for inflation.

Good furniture quits depreciating and becomes "vintage" instead. The best time to buy is just before that point.
No, good old furniture is subect to trends and tastes, which change. For instance,  200-300 year old furniture was something I could never hope to afford, 20 years ago.

Now, I could afford an 18th century chest of drawers without a huge stretch. The market for old brown furniture has dropped, the younger generation s are not buying it, boomers are selling same to boomers and the last boomer owner will be stuck.
« Last Edit: September 20, 2016, 01:44:10 PM by iris lily »

Jack

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #28 on: September 20, 2016, 01:55:21 PM »
I don't have a dog in the metaphoric fight and could really care less.

"That means you do care / at least a little" -- Weird Al Yankovic, Word Crimes

Bakari

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #29 on: September 20, 2016, 02:09:39 PM »
I use the term "iCrap" for pretty much all overpriced, planned obsolescence mass market consumer electronics, regardless of who makes them.  Now, if someone comes up with an equally catchy phrase for Andriod or the other OS phones, tablets, etc, hey, I'll throw that one around as well.  You have one?  Crap-droid, An-trash, Win-Duh's, Micro-Crap, etc



Android does not have anywhere near the deliberate planned obsolescence of Apple.

I got a iphone 3s when the 5 came out (free when someone upgraded), and learned that Apple actually required anyone who puts apps in their app store (the only official and simple way to get new apps) to NOT make their software backward compatible with older iphones.

As far as I know every Android phone uses the same microUSB plug (maybe some use the equally universal miniUSB) plug, so any companies phone works with any charger (as well as bluetooth headsets, cameras, GPS units, rechargeable bicycle headlights, etc).  Apple is the only one with TWO mutually incompatible proprietary plugs. 
Not to mention the degree to which they make it difficult to decide what you do with your own data and software.


The marketing which allowed them to become the single most dominate force in mobile computing while simultaneously being the absolute worst in terms of planned obsolescence and user choice and upgradeability and all the things which objectively should matter, it shows absolute brilliance, and deep understanding of human psychology.  I find that far more impressive than any of their technical achievements.

MilesTeg

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #30 on: September 20, 2016, 03:10:33 PM »
I use the term "iCrap" for pretty much all overpriced, planned obsolescence mass market consumer electronics, regardless of who makes them.  Now, if someone comes up with an equally catchy phrase for Andriod or the other OS phones, tablets, etc, hey, I'll throw that one around as well.  You have one?  Crap-droid, An-trash, Win-Duh's, Micro-Crap, etc



Android does not have anywhere near the deliberate planned obsolescence of Apple.

I got a iphone 3s when the 5 came out (free when someone upgraded), and learned that Apple actually required anyone who puts apps in their app store (the only official and simple way to get new apps) to NOT make their software backward compatible with older iphones.

As far as I know every Android phone uses the same microUSB plug (maybe some use the equally universal miniUSB) plug, so any companies phone works with any charger (as well as bluetooth headsets, cameras, GPS units, rechargeable bicycle headlights, etc).  Apple is the only one with TWO mutually incompatible proprietary plugs. 
Not to mention the degree to which they make it difficult to decide what you do with your own data and software.


The marketing which allowed them to become the single most dominate force in mobile computing while simultaneously being the absolute worst in terms of planned obsolescence and user choice and upgradeability and all the things which objectively should matter, it shows absolute brilliance, and deep understanding of human psychology.  I find that far more impressive than any of their technical achievements.

In the "planned obsolecense" department Apple is actually much better than Android. Apple phones typically receive software updates for 3-5 years, whereas the vast bulk of Android phones receive 0 updates. Typically only the "flagship" model receive updates, and typically for less than 2 years. And even getting to the current state of affairds took a lot of market pressure.

For example, iOS 10 just came out and is available back to iPhone 5 (3.5 years old) whereas the Android 7 (the latest version) won't be released for samsung's S4, which is the same age as the Iphone5. And it will probably takes several months to get A7 onto the newer phones because of the crappy distribution model of Android (which is carrier controlled instead of controlled by Google).

Don't take this as praise of Apple, as other than having a decent policy on OS updates they are indeed terrible for the reasons you mentioned (and others).

Of course, now that the mobile market is maturing (i.e. gains in hardware speed slowing down dramatically), we _should_ be able to get devices that will run the latest OSs for a lot longer. I doubt we will though, as all the makers have a vested interest in you buying new as frequently as possible.

gimp

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #31 on: September 20, 2016, 03:30:03 PM »
Oh boy, this thread has devolved into android vs apple! Hooray!

Most things you buy do depreciate much faster than a car does (most are consumed and worth $0 after a few minutes), but also, cars cost more than most things you buy.

I propose the following way of balancing this:

Consider cars a sunk cost. If you own cars, don't even count them towards your net worth. Ask yourself: Can I buy this car if the money I spend on it disappears entirely the minute the keys are mine? You can also think of this money as a negative investment: not only does the money disappear, but it also bears interest: for a car purchase of a certain dollar price, you should expect a fraction of that dollar price to leave your pocket every year thereafter, growing over time.

Most people I talk to don't do this, but it makes my life a lot easier. I don't care how much my cars depreciate because I don't consider them assets. I get to enjoy them without the worry.
On the other hand, non-car people can instead think of it as choosing the right A->B machine that costs the least and has the smallest "interest."

Bakari

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #32 on: September 20, 2016, 06:27:34 PM »

 Apple phones typically receive software updates for 3-5 years, whereas the vast bulk of Android phones receive 0 updates.


That assumes that updates are a vital part of using a pocket computer.  That old 3s still works fine with its several year old operating system, its just you can't download any apps to it.  Kind of like how XP is no longer officially supported, but almost all new software still supports the decade and a half old operating system.  It would be like if Microsoft didn't allow any software developer to support anything but Windows - what are we on now? 10?


Oh boy, this thread has devolved into android vs apple! Hooray!


lol, not really, since neither of us are particularly fans of either.
Just pointing out that exspensive electronics which are designed to have to be replaced within a couple of years even if they still work is a nice extreme example of depreciation.


Quote
Most things you buy do depreciate much faster than a car does (most are consumed and worth $0 after a few minutes), but also, cars cost more than most things you buy.
exactly

Quote
I propose the following way of balancing this:

Consider cars a sunk cost.
if one is trying to be frugal, one shouldn't replace a car until it is so far gone that the repairs would cost more than it could be sold for.  In which case you are going to get nothing back for it, ever, and then the entire concept of depreciation is moot.
Come to think of it, the very idea of depreciation seems like a very introductory concept for a Mustachian.  Buy only those things which will add significant value to your life.  Unless its stocks or bonds, nothing you buy is an investment, you get it for the value it holds for you to use it.  So who cares what its "value" on the market is?

Similarly, the even larger "asset" of a home: its appreciation is totally meaningless- if you ever actually cash out, that means you also just became homeless.  If your home doubled in value, then every other similar home in your area did too, and so you spend all your "gains" on the next place, and you are exactly where you started.  The only times real estate is actually an investment is if it either earns income (rental) or you improve and flip it (in which case you're really just being paid for your effort in improving it).
Not understanding that distinction is a part of why the 2008 bubble happened
 

gimp

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #33 on: September 20, 2016, 06:35:36 PM »
The US (and others) have systematically and purposefully made homes the biggest asset most people own. I imagine it's because while they can budget a mortgage payment, they can't budget savings.

I agree entirely - a home's utility should be a roof, walls, a yard - and a hedge against inflation. Not an asset you count on to appreciate. Unless you're actually using it as an investment in the more traditional sense of the word.

GetItRight

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #34 on: September 20, 2016, 06:52:00 PM »
I don't get it. I've always sold my vehicles for about what I've had into them so far as purchase plus any improvements, upgrades, or major maintenance items (engine or trans rebuild, etc.) but not including minor maintenance (oil changes, tie rods, ujoints, etc.), a few I've sold for significantly more than i had into them. I've always drove fairly desirable vehicles in the 30-50 year old range though, so already depreciated to a stable value or appreciating. I hate modern vehicles, and I don't want to lose a bunch of money to depreciation if I decide I want or need a truck and not a compact car, or just something different altogether.

Papa Mustache

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #35 on: September 21, 2016, 07:15:03 AM »
Tools don't hold their value any better than anything else. They are forever useful though. Occasionally some mechanic will sell his entire toolbox and contents for 1/5th what he paid for those tools. He's earned a long living with those tools.

Cheap tools aren't worth anything at all resold. If you paid $15 for it from the budget import tool store then expect it to be worth a $1 at most. Those tools can also be good if treated like they were made of glass. I have alot of these tools. As long as I don't abuse them, they last a long time if used occasionally. 
« Last Edit: September 21, 2016, 07:50:09 AM by Joe Lucky »

Clever Name

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #36 on: September 21, 2016, 08:39:24 AM »
Android does not have anywhere near the deliberate planned obsolescence of Apple.

I got a iphone 3s when the 5 came out (free when someone upgraded), and learned that Apple actually required anyone who puts apps in their app store (the only official and simple way to get new apps) to NOT make their software backward compatible with older iphones.

Not to get even further off topic, but I am an app developer and this is absolutely not true. I could, if I was particularly masochistic, release an app that supported every iPhone model and iOS software version ever made (except for a few of the earliest versions that didn't actually support third-party apps at all). The reason people don't do this is that it requires a bunch of extra effort and makes you, at best, a negligible amount of extra money because almost no one uses those old models anymore. Plus older models often simply can't run modern apps because they require too much processing power. This is particularly true for things like augmented reality or games with fancy graphics.

Back to the topic of this thread, I think car depreciation is often exaggerated around here. Before I discovered MMM I purchased a slightly used Jeep Wrangler for about $26k. I drove it for two years, including all kinds of off-road adventures, and then when I discovered MMM I listed it on CL and almost immediately sold it for about $24k. That comes out to less than $100/month of depreciation, which I don't think is really that unreasonable for someone who is otherwise in a very good position financially (I unfortunately was not in such a position at the time). If I had held out a bit longer I could probably have gotten closer to $25k.
« Last Edit: September 21, 2016, 08:45:44 AM by Clever Name »

Melody

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #37 on: September 21, 2016, 09:01:30 AM »
Sure, they do. But you lose a lot less money per item and don't lock your spending for 5-7 years when you buy a computer, for instance. None of the other items on your list come close to the single-handed impact a vehicle does.

Making a mistake with a car purchase can easily be $5k lost in a few months at the cost of close to zero down payment. Most things on your list don't even total that, so assuming they were purchased, still won't implode your life. Additionally many (but not all) other items are not as easily financed as cars.

Also, some computers do hold value decently well - I sold a 5.5+ year old Macbook Pro I had purchased for around $1100 for $400.

The reality is, you are technically right, but from a practical perspective, people make bigger single mistakes on cars than any other item, which means it's a good focus point for personal finance people.

I would argue that homes depreciate in value as well. The land you own is appreciating in value, but the home itself, not so much. I always use this thought experiment.

There are 2 homes on identical plots of land sitting right next to one another. They were both built in 1975 and have identical floor plans. One was remodeled in 2010, the other is completely original. No work has been done. If homes appreciate in value they should both go for around the same price.

That's a bad example. Appreciating in value doesn't mean that adding improvements/upgrades cannot increase value. Likewise, it does not mean immunity to neglect.

If homes appreciate in value, both should sell in 2010 for more than they were purchased for - not the same price.

Take that brand new $1,200 leather sofa you just bought. Do you really think you could get $600 for that in 5 years?? I don't see that happening. People would be trying to buy it for maybe $200 tops.

This is a good example. My wife and I recently bought fairly close to matching black leather furniture on Craigslist piecemeal, but spent $600 total for 3 couches, a loveseat, and a recliner. Brand new ones would have cost us close to 10x the difference.

Furniture drops like a rock. You just need to browse your local Craigslist to see tons of postings like, "Bought from <name brand store> 2 years ago for $1k, selling for $300!" types of things.

Yep I understand that cars are frequently the biggest mistake people make. I was just trying to point out that Dave Ramsey and others should also preach against buying new furniture, buying new computers, buying new tools, buying new appliances, etc. etc. Most all of it plummets in value once it's no longer new, meaning you take the same huge depreciation hit on your new fridge (percentage wise, not $ wise) as you do on that new car.

And it's REALLY easy for people to get sucked into the "Oh we must furnish the whole house in decorator items." When you count things like rugs (can be VERY pricey), living room sets, big screen tvs, etc., it REALLY adds up. We knew a couple that drove reasonable cars, had a reasonable house (for their income), but when you stepped inside it was like the Ashley gallery. I'll bet the living room package set them back $7,500.00.
Tell me about this! I remember moving into my 36sqm apartment (after having sharehoused, so already owning a lot of furniture etc) and bam $1500 on mostly craigslist (some ikea stuff) just like that.
I can easily see a living room of nice stuff costing $7500.

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Joggernot

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #38 on: September 21, 2016, 09:03:51 AM »
We hardly ever buy anything new either, and recently I saw the effects of depreciation on CL.

I had some microwaves that had been sitting in my basement for years that I had collected cleaning out our rental houses. I cleaned them up and put them on CL for something like $20-25 and got NO interest. These were clean microwaves in perfectly fine working order. I let the listings sit there forever with no bites and eventually just gave them to Goodwill.
Microwaves go for at least $20 down here at garage sales.  Can't say I've even seen any on CL.

Melody

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #39 on: September 21, 2016, 09:07:56 AM »
Oh boy, this thread has devolved into android vs apple! Hooray!

Most things you buy do depreciate much faster than a car does (most are consumed and worth $0 after a few minutes), but also, cars cost more than most things you buy.

I propose the following way of balancing this:

Consider cars a sunk cost. If you own cars, don't even count them towards your net worth. Ask yourself: Can I buy this car if the money I spend on it disappears entirely the minute the keys are mine? You can also think of this money as a negative investment: not only does the money disappear, but it also bears interest: for a car purchase of a certain dollar price, you should expect a fraction of that dollar price to leave your pocket every year thereafter, growing over time.

Most people I talk to don't do this, but it makes my life a lot easier. I don't care how much my cars depreciate because I don't consider them assets. I get to enjoy them without the worry.
On the other hand, non-car people can instead think of it as choosing the right A->B machine that costs the least and has the smallest "interest."
I count my car as an asset because i do not need it to get to and from work. It's  therefore a lifestyle decision that i could sell out of at any point, much like i am going to sell my surfboard now all my surfer friends have moved away. (The surfboard and other personal items aren't counted in my net worth as its difficult to quantify the value and the total amount is low).
For someone who requires a car, sunk cost still only applies to a limited extent (i.e. still possible to sell that SUV, buy a used honda civic and bank the difference.)

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Jack

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #40 on: September 21, 2016, 09:14:55 AM »
Back to the topic of this thread, I think car depreciation is often exaggerated around here. Before I discovered MMM I purchased a slightly used Jeep Wrangler for about $26k. I drove it for two years, including all kinds of off-road adventures, and then when I discovered MMM I listed it on CL and almost immediately sold it for about $24k. That comes out to less than $100/month of depreciation, which I don't think is really that unreasonable for someone who is otherwise in a very good position financially (I unfortunately was not in such a position at the time). If I had held out a bit longer I could probably have gotten closer to $25k.

Wranglers are outliers.

The Happy Philosopher

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #41 on: September 21, 2016, 09:21:13 AM »
The reason cars are stressed so much is they are usually one of the biggest costs for someone, and eventually will depreciate to zero (or require a ton of maintenance which is essentially the same thing). Many of the durable goods you can purchase used, and for all practical purposes will last forever and depreciate very little. Stuff like clothes and electronics act like cars (although with faster depreciation curves). Tools, some furniture, books, instruments, art can for all practical purposes last forever.

nereo

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #42 on: September 21, 2016, 09:26:26 AM »

I count my car as an asset because i do not need it to get to and from work. It's  therefore a lifestyle decision that i could sell out of at any point, much like i am going to sell my surfboard now all my surfer friends have moved away. (The surfboard and other personal items aren't counted in my net worth as its difficult to quantify the value and the total amount is low).
For someone who requires a car, sunk cost still only applies to a limited extent (i.e. still possible to sell that SUV, buy a used honda civic and bank the difference.)

Your car is an asset when you sell it.  It's a liability while you own it.  The same is true for your surfboard, although it's less of a liability because you do not continuously have to keep it registered, insured and the cost for maintaining a surfboard is fairly negligible.  If you never sell your surfboard, it never becomes an asset from a strictly financial definition. Ditto if you never sell your vehicle.



boarder42

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #43 on: September 21, 2016, 09:35:21 AM »
1st you just compared buying something used like your car to buying something brand new in a couch. 

craigslist exists you can buy used furniture.  most furniture if taken care of and purchased correctly will maintain value.  our whole house is furnished by craigslist.  and you'd be hard pressed to find something in our house that i couldnt resell on CL for more than we paid. 

dining table with hutch - 400 - easily sell for 800
sectional microfiber dual recliner - 150 easily sell for 500
la z boy love seat - 150 - easily sell for 400

the list goes on.

i do the same thing with cars.  find super good deals ... the issue is i usually cant find them for half what i can sell for and they are harder to sell.
i do the same with boats.  buy in this time of year resell in the spring after a couple year's use for a small profit.

i think you have to look at how you purchase items not just that "everything depreciates"

doesnt even have to be craigslist ... i just scored a 65 inch TV for 80 bucks thru some tricks of the trade learned on slickdeals.  brand new delivered and setup in my house .. have a hard time seeing that depreciate past 80 dollars. before we're not using TVs anymore
« Last Edit: September 21, 2016, 09:40:39 AM by boarder42 »

clarkfan1979

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #44 on: September 21, 2016, 10:10:24 AM »
hot tubs

Turnbull

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #45 on: September 21, 2016, 12:51:23 PM »
We hardly ever buy anything new either, and recently I saw the effects of depreciation on CL.

I had some microwaves that had been sitting in my basement for years that I had collected cleaning out our rental houses. I cleaned them up and put them on CL for something like $20-25 and got NO interest. These were clean microwaves in perfectly fine working order. I let the listings sit there forever with no bites and eventually just gave them to Goodwill.
Microwaves go for at least $20 down here at garage sales.  Can't say I've even seen any on CL.

There are always some on my CL. Maybe no one's buying them. Either that or there's something wrong with my marketing.

russianswinga

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #46 on: September 21, 2016, 03:52:23 PM »
I'll give a personal example of something holding value much worse than expected and much better than expected:

1. A bonded white leather couch. Bought by me USED 5 years ago for $500. Retail on it was $1k or so at the time.
Got rid of it this year because the bonded "leather" was flaking so bad, I didn't even want to keep it in the house anymore. Listed for $100 on Craigslist, then $50, then free, only then did it leave my home.
Depreciation - 100%. Don't buy bonded leather anything.

2. iMac computer, bought for $1200 new in 2009. Upgraded with double the ram in 2012. Sold for $400 in 2015. I normally would value a computer at $0 after about 4 years and take it to the dump. Well, apparently macs depreciate more like cars (fast) and less like other computers (like a stone, worthless).
Depreciation - 2/3, but that's 1/3 more than I was expecting. If you want your computer to be worth something when it's time to replace it - buy a mac.

Goldielocks

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #47 on: September 21, 2016, 04:28:55 PM »
These things don't:
-quality musical instruments
-art

Bought a trombone for $90 three years ago, sold last week for $145, including the extra small dent.

Some paid you $55 to dent a trombone?  cool.  Reminds me of hip "reclaimed simulated barnwood/distressed" furniture today...

Even more cool -- my son had to buy the trombone from the "kids" spending account (that is used for school fees -- I found it on CL, Dad and he went to pick it up), ...then the buyer came early, before I arrived, so he handled the final sale alone (he is 14).  So, he learned how to turn $90 into $145 with an ad and good timing.

And a GREAT BIG SMILE!

ender

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #48 on: September 21, 2016, 08:03:09 PM »
What about jewelry (Diamonds!!!), good wine, guns and ammo? Do those things decline in value, appreciate or at least hold their value? I imagine some collectibles increase in value but are highly dependent on current collectibles market.

Diamonds drop dramatically if you buy them "new" (ie from a dealer).

boarder42

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Re: Doesn't everything you buy depreciate faster than cars depreciate?
« Reply #49 on: September 22, 2016, 07:21:31 AM »
What about jewelry (Diamonds!!!), good wine, guns and ammo? Do those things decline in value, appreciate or at least hold their value? I imagine some collectibles increase in value but are highly dependent on current collectibles market.

Diamonds drop dramatically if you buy them "new" (ie from a dealer).

diamonds are the biggest racket/ monopoly the world has ever seen.  one of the most plentiful gem stones that debeers has locked up in vaults and slowly lets out into the world marketplace.  only a matter of time before the second hand market is saturated with diamonds.

 

Wow, a phone plan for fifteen bucks!