Buy Cost vs. Maintenance Cost

Sometimes an item costs more than what its price tag says. Even if it's discounted or on sale. But sometimes an item costs much less than it's price tag- even if you paid full price for it.

Take a car, for example. Like most people, I would also like to have my own car someday. And lucky for me, for the past couple of years I've been fortunate enough to have the means to buy one.

Two years ago, I had enough saved up to be able make a substantial down payment on a modest, brand new car. But I didn't buy one.

And last year, even though I paid for my wedding and honeymoon, I'm pretty sure I would have been able to qualify for a car loan. But I still didn't buy one.

This year, I might be able to save up enough again to make a down payment or at least qualify for a car loan. However, I'm still not going to buy.

I really do want a car. But when I think about it, once I buy a car I will be:
  • making monthly loan payments,
  • buying gas,
  • and paying for parking.

And when I consider all of those things, I realize I can afford to buy a car but I just can't afford to maintain ownership of one.

Sure, I could use it just on weekends or on special occasions to cut costs. But why spend so much money to buy something I'll rarely use?

I really would buy it if i could afford it.

I could buy second hand and - if I'm lucky, or really discerning - cut even more costs by having a smaller monthly loan payment and not spend too much on repairs. But gas and parking expenses would still be much larger compared to what I pay for public transport.

I might be able to balance my budget and live with those payments. But if I spend more, then there's less money for me to save and invest. Which means there's less opportunity for me to grow my money. So there's an opportunity cost as well.

This concept doesn't just apply to cars, though. If I buy a new phone for example, it's the same thing. I have a first generation smartphone (think iPhone1 contemporaries). If I save up some more, I could afford to buy a decent new smartphone with cash.

But most of the new features that are lacking in my phone need an internet connection. So aside from the cost of buying a phone, I now have to pay more per month for a data plan. Sure I could avoid using my new phone for facebook, twitter, downloading apps, or surfing the net to cut costs. But why pay for new features I won't use?

On the flip-side, maintenance cost can also be my friend. New models of air-conditioners, refrigerators, and light bulbs use much less electricity than older models. So in the end, they end up saving me money instead of costing more. (Which means more savings - and more opportunities to grow my money and one day afford those big-ticket items I want.)

The same can be true for other appliances. A cheaper electric fan might cost less and not use more electricity, but if it needs to be repaired often a costlier but higher-quality fan might save money over time.

So when I buy an item, I make sure to check not just the price tag but the maintenance cost as well.

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photo credit: ultracase via photopin cc
photo credit: Bryce Womeldurf via photopin cc