How are you going to ‘not buy’ a computer?
Would love more details on how you did this… very interesting.

@ dawn – When my powerbook dies, I’m probably going to get an Asus Eee. This is a $300 computer – not entirely free, but if it lasts 3-4 years, it’s still less than 100 bucks a year. The trick to doing this is really in finding the balance between the three components, the price you pay, the price you get and the time it lasts. Often high quality used items provide the biggest bang for the buck. For instance, in terms of buying watches check out http://www.artoftime.com (I’m not affiliated) or similar stores. Then learn which watches make good movements and which are more fashionable and buy something conservative. Later the watch can be sold for almost the same that you paid for it.

@ chris – around here people are literally giving entertainment centers and exercise equipemtn away. I’m figuring, if I just had the space to store them, I could gather them. Drive them to a less wasteful city/state and sell them.

Fubek, is opportunity cost relevant when the alternative (a $75 deposit account yielding 5% APR) cannot replace the original non-discretionary requirement? Maybe a dining room set is discretionary, but can one be rented for less than $9.73 for 2.5 years?

Steve,

if you can rent it for less than $5.89 a year (which is the average of loss plus opportunity cost), you should rent it, of course.

Thus, opportunity cost always applies.

Now for the question IF you can rent the furniture of the example for that amount of money: that is basically irrelevant for my point. If you cannot, you should buy, if you can, rent.

My point is to just never forget to include opportunity cost. 🙂

Steve,

heh, tough question. Hmm.. if you have no alternative, then there is also no opportunity that you miss. Thus, no opportunity cost 😉

That’s my take!

The biggest gap between new and used prices is in clothing, especially baby clothing, anything for children (cribs, strollers, toys), and books, which cost 25 cents at my Goodwill.

This is a great post. This is the principle I follow for owning cars. I dont actually pay for the cars. I buy 6-7 year old high end cars at auctions and then drive it for 3-4 years and then sell them at my purchase price. I have to pay for maintenance, insurance and gas but it works out to be cheaper than public transit cost.

There are auctions you can attend to bid on off lease vehicles. You get to go visit the lot the day before, start the car and check it out but you cant drive it around. You usually save around 30-40% off the regular used price.

You have to really research you car and should know a bit about cars. Its pretty easy to avoid lemons if you brush up on basic auto mechanics.

Car is not an asset, just at tool.

As you pointed out, for some things, it does not make sense to buy better quality (i.e., more performance).

Computers are a good example: As another poster pointed out, you can buy a pretty good computer for 1,000$. It makes no sense to buy a computer that is only 10-20% faster for triple the price since a few years down the line, both will be obsolete and pretty much worthless.

Same with cars. Do not buy a luxury car with the idea that you will recuperate your premium when you sell it. Eventually your depreciation cost will be the cost of your vehicle.