Excerpted from the forthcoming book Renegade Consumer: The Battle for Your Economic Freedom.
A parallel way to examine the real cost of acquisitions is by making an objective evaluation of how many times you are likely to use it. While a truly honest answer can be hard to obtain, especially when entranced by the glittering possibilities of a new acquisition, a few minutes spent thinking the purchase through in these terms might prove helpful to resisting it, or making a better choice.
Purchases of expensive items like kitchen appliances, power tools, and especially any kind of recreational device or vehicle tend to be under-thought with respect to end value. If you can come up with a reasonable estimate of the number of times the item is to be used, and divide the cost by that count, you may come up with a Real Cost per Use figure (RCU Factor) that makes the purchase unreasonable… or even absurd. The trick to getting a useful figure here is not to inflate the expected number of uses—and that figure will try to inflate itself a good deal.
Let’s begin with a good example—that is, an example of a good purchase based on this principle. Most people use a microwave oven every day, sometimes many times a day. If used once a day for five years, the price can be divided by 1800 to obtain that real cost per use factor—let’s say it was a $100 purchase; the RCU is 5.6 cents per use. Used an average of ten times a week, the five-year total becomes 2600, or 3.8 cents per use. The efficiency and usefulness of microwave ovens makes them well worth this trivial—and probably overstated—cost per use. It’s even a basis for spending more money on the item, under the principle of “buying for value”; a better-made model of a size and with features that will serve all needs can prove out, via the NeCU Factor, to be a good purchase. There’s no advantage in saving a few pennies per use for a model that is too small, too inflexible and may not last as long under normal use. Unless the buyer is one of the rare group that will not use a microwave once a day—or seven times a week—the purchase of the costlier unit is probably justified.
Now let’s turn it around, to an expensive, faddish kitchen appliance on quite a few counters that is likely used nowhere near as often as a microwave: a high-power stand mixer. The most popular models run about $300, and it’s easy to go past $600 without a blink. These are durable, even lifetime items, but they are often purchased as much for kitchen fashion as for functionality. Assuming that the buyer will keep the unit for ten years before discarding it for some reason (probably a kitchen makeover requiring a different color), that means it has about 3,600 days of potential use. If the buyer uses it once a month to mix a cake or bread dough, it will be used about 36 times. At $300, that means each use approaches a dollar.
A dollar’s not bad, maybe… but that assumes use once a month. A prolific baker or cook might use it several times a week, making the cost tradeoff well worthwhile. But we all know people who have one of these on the counter and do far more cooking with their microwave than with the sort of scratch ingredients that demand a heavy mixer… so let’s be charitable and say these folks use their mixer four times a year, for holiday cooking and a birthday cake. That means around forty uses in ten years, and a RCU of $7.50. It is very unlikely that whipping together cake ingredients or some cookie dough demands an appliance that doubles the cost of the cake or cookie platter.
Consumers rarely think in these terms, though. They are sold by endless glossy ads of a mother and children making dozens of cookies in a large spotless kitchen, made possible only by the gleaming Burgundy Blackberry™-enameled mixer at the heart of it all. (Along with the more subtle sell of a thousand magazine and newspaper recipe sections assuming that such a mixer stands next to the high-end food processor.) The $300 item that occupies counter or cupboard space day after day, year after year, needing cleaning at frequent intervals lest its shiny finish disappear under kitchen-fume oils and dust, is rarely put to such broad-shouldered use if it’s put to use much at all. If used twice a year, as many likely are, that RCU hits a whopping $15. Had the buyer made an honest estimation of how often the mixer would be used—even that once a month, meaning a significant dollar per use—they might have passed on it and saved their money for something more useful and value-reasonable—a $20 hand mixer, perhaps. Or just a little extra shoulder and arm exercise at such infrequent intervals.
A more recent counter decoration in many homes is a single-cup coffeemaker like those first popularized by Keurig. (We’ll skip over the more extended fad for espresso machines; it’s all too much like the mixer mixup.) These machines, at $120-150, turn out one cup of coffee, tea or other hot-water based drinks about as fast as the user can select a “pod,” drop it in and press the lever. The ads pitch quality, but most tasters would agree the result is at best “adequate”—they are not for coffee aficionados. The pods are fairly expensive, 50 to 80 cents or more each, and until Keurig’s patent expired in 2010, were available only from the maker. Yes, it was yet another junk-lock product, a whole system’s worth. Buyers can now get generic pods from other makers, and even a reusable pod to be filled with ground coffee or tea of the user’s preference. None of which really improves the net quality of the result, because the entire notion of single-cup makers is more about extracting bucks from your wallet, with the cup of coffee or tea or hot chocolate a mere afterthought.
But we’re talking about the RCU Factor here: A $125 machine amortized over two years is about 17 cents a day, so assuming the user has his or her single cup per day, we add that to the cost of the pod to get a per-cup cost of 70 to 90 cents or more. Cheap, perhaps, compared to a cup of fast-java from McDonald’s, Dunkin or Starbuck’s, but many times more expensive than coffee made using more traditional home makers and ingredients. So is a smallish cup of middling-grade coffee (plain or flavored) worth nearly a dollar? When it’s nothing that would appeal to a genuine coffee lover? Highly subjective, yes—but it’s not too hard for the renegade view to see it as a very high cost, a continuing high cost all in the name of nothing but our old friend “convenience.”
Enough of small examples. Let’s get serious.
As the cost of items go up and the number of uses drop, the per-use cost reaches staggering levels. A snowmobile or jet-ski, for example, is easily a ten thousand dollar purchase these days, especially when necessary accessories like a trailer, cover etc. are included. It is easy to double that figure with larger, high-performance models, double trailers, and the like—but let’s stay with a cost, new, in the garage of ten grand.
How many days will that craft be ridden? Since the snow craft can only be ridden in snow and the water craft can only be ridden on water, the number of days that they can be ridden will be limited one way or the other in most areas. Let’s say that most buyers will have at most a six-month riding season in a good year. Unless they live on snow trails or a lake or river, a riding day will mean loading up and trailering to a location, meaning that will be the day’s major activity, further limiting such days. It’s probably not too much to say that even an avid enthusiast would get out no more often than one day a weekend, in season, or perhaps three times a month. Let’s say it’s 20 times a year, which is probably very high for most owners of such craft.
If the craft cost $10,000 to bring home and had an operating cost of $50 per day (fuel, launching and site fees), an annual registration cost of $100, and general maintenance and repair of $200 a year, five years of ownership would cost about $16,500. Let’s say the unit sells to its next owner for $2,000—trailer, accessories and all. The five years of use have cost $14,500 for a hundred days of riding—again, that is likely well above the average—or $145 per day of riding.
The buyer likely did not think of every day spend sliding over snow or water as costing anywhere near that much; the tendency is to think of such time as being “free” since they already own the equipment. But depreciation (or total cost, if there is no final resale value due to a crash or wear-out) plus maintenance plus all those fees and costs… it adds up, and it’s all real money. Consider that ten days a year is a more common rate of use, and it’s nearly three hundred dollars a day to own all that “freedom.”
(Enthusiasts who are not certain to use their expensive craft to a cost-effective degree are advised to look into the “expensive” option of renting—renting current models every time, under someone else’s cost structure, for a whopping $50-100 a day. If you do such activities with the frequency of most people—a few times per season—keep in mind that these expensive toys can be rented, when the whim strikes, at a fraction of both the immediate and long-term cost of purchasing. Which is what most buyers would do if they stopped and made this simple calculation before letting the gloss and gleam—the gloss of the paint, and the gleam in the salesman’s eye—influence their thinking.)
There’s an even more extreme example: RVs, travel trailers and motorhomes. Making the same sorts of considerations as above, that “freedom” that seems so tempting to acquire for family vacations could end up costing $20-30,000 per use, or the cost of the most luxurious imaginable transport, lodgings and conveniences. No? Consider a $100,000 motorhome, very modest on the overall scale. It likely costs more than $1,000 a year in registration, insurance, maintenance and upkeep, without being driven a mile. The per-mile cost, in fuel and additional maintenance, is likely to be $2.00 or more. After five years, it is sold for an excellent price of $25,000. The net cost for simply owning it and having it take up half a driveway for five years is $16,000 a year. If it were driven on two trips a year of 1,500 miles total, the annual cost would increase to $22,000, making per-trip—per use—cost almost twelve thousand dollars. Factor in a costlier RV ($250-300,000 is considered just moderately upscale) and fewer trips, and the RCU blows past $25,000 without any trouble at all.
All these are figures the jovial off-road vehicle and RV salesman will deflate at every opportunity, insisting that you’ll never get off or out of your personal “freedom machine” and hand-waving away all of the other costs that add up, year after year. Renegades know better… or should, now. Whether it’s a set of golf clubs, a costly power tool, a recreational vehicle of any size or just a kitchen appliance, a few minutes spent figuring its real, lifetime cost on a per-use basis might do more to moving you to renegade thinking than any other exercise.
You will find a panel on figuring the RCU factor on the Renegade Card. Apply it. Calculate the factor, as honestly as you can, on all purchases of goods you think you’ll use many times, including expensive clothing, shoes and the like. It’s an important tool for judging what to do with your wealth, especially when you combine the analysis with the DBI factor on that expenditure. An off-road motorcycle you ride a dozen times could eat fifty thousand dollars, in the long run. An expensive motorhome bought in your thirties could represent more than a million dollars in final wealth.
Once the scale of real financial waste is understood, the absurdity and economic violence of the marketing pressure pushing you to do that wasting should be evident. And thus easily avoidable.