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Monday, August 2, 2010

Depreciation Appreciation

A post on depreciation at Early Retirement Extreme got me thinking on the topic of depreciation. Never borrow for depreciating assets is a personal finance truism I've read more than a time or two.

As usual for me, my success with the big stuff has been minimal.

CARS: We used to buy used cars--believing the oft-cited "It depreciates by 20-30% once it's off the lot. We did the math on our used Camry and discovered that we had, in effect, paid for the first owner's depreciation! Desirable cars retain their value and don't depreciate as much as you'd think. We've bought two new cars: a 1998 Camry and a 2003 Civic Hybrid, both still chugging away.

With the small stuff, we've done well. Consumer goods depreciate immediately after purchase and basically retain that value...forever. Unlike the proprietor of ERE, we do not live a minimalist lifestyle. We love owning books and CDs and have a fashionista daughter.

BOOKS: We used to patronize wonderful used bookstores in the various university towns in which we resided. At the time, we thought 50% off books was great! Now, we rarely spend over $1.00, and that's for a hardcover. I guess if we wanted to have a yard sale, we could sell all our 25 cent books for 25 cents. But usually we donate them back.

CDs: These used to be a major expense, but (affiliated with has been a blessing.

CLOTHING: Even fashionista college students can find most of what they want at a good thrift store (luckily, we have one). "Mistakes" can be donated back or--sometimes--swapped at the Buffalo Exchange, which has been around for years, but which we only recently discovered. Lucy Marmalade used credit garnered at the New Orleans store to buy a pair of Frye boots at the San Francisco store.

Oh, how we appreciate depreciation. Do you?


Shelley said...

Absolutely. Thanks for introducing me to a cool new blog!

Budgeting in the Fun Stuff said...

We bought my husband's car used, but at the time it was the only way we could have afforded a Prius, which really comes in handy since he drives so much (45 minute one-way commute and he's a sport official all over the city as well).

I either buy my clothes at Goodwill or Kohl's with the gift cards I always get at Christmas.

So yes, I appreciate depreciation, but new stuff has a place in our lives too...we are only mid-frugal, lol.

Funny about Money said...

I'd love to see the figures on the new-car purchase. I'd rather buy a new car any day than take a chance on used.

In this sense, I appreciate depreciation: the longer I hold onto my car, the less it's costing me. The state drops the cost of registration each year the car ages, and every year I don't have to buy a new car is a year I don't have to pony up another 20 grand.

Buying the car new means I can hang onto the car that much longer; also, I know how it's been cared for from the git-go.

Normally, I'd buy a new car and figure to drive it for 10 years. What with permanent unemployment now a part of my life, though, I've decided to hang onto the current 10-year-old Toyota until it falls apart like the minister's one-hoss shay. Also, frankly...I'm curious to see how long the thing will keep running!

metscan said...

The Buffalo Exchange sounds great. I don´t think we have anything like that over here. I´m sorry to say this, but I could not buy something used for clothing, it is just too personal. We do have some antique pieces of furniture. They have been used ; )

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