Saturday, September 1, 2007

New vs. Used Washer/Dryer

We had a dilemma this week in regards to deciding to go with a new or used washer/dryer. Here's how our train of thought went:
  • Our washer's motor is dead and it would cost around $200 to repair it. It's quite old though.
  • "Oh no! We have to replace our stackable washer/dryer! What to do? What to do?"
  • Let's look on Craigslist for one...There's some for $200 that are 5 years old but they may die soon on us.
  • Let's look at new ones...Ugh they go for about $1000 on the low-end.
  • Let's buy the new one with a 5 year warranty so we don't have to worry about it dieing soon.
At that point, I decided we needed to sleep on the decision at least a night and if we were still into going with a new one 2 days later, we would go out shopping for one. I then the next day thought about all that I have been reading in the personal finance world and here's what kept coming at me: "Rich people buy items that appreciate. Poor people buy items that depreciate."

You may ask how does that apply to my washer/dryer issue. If I bought the $1000 new model and considered current used prices as indicators of how much one of these depreciates, we're looking at about $160/yr depreciation of a new one after 5 years (($1000 - $200/5 = $160). Let's pretend I "bought" a used one for $1000, but $200 going to the seller and $800 going into an investment making 10% a year. What would my $800 investment look like?
  • Year 1: $880
  • Year 2: $968
  • Year 3: $1064.80
  • Year 4: $1171.28
  • Year 5: $1288.41
That means if the used one lasts me 2 & 1/2 years with minimal repairs, my replacement would be "free" (using the income to replace it). I did research and what I found was that they last about 10 years normally. So if my 5 year old used one lasts for 5 years after I buy it, not just will I have money to replace it, but enough to buy 2 of them if I wanted and go out to a nice dinner as well.

That's all great math wise, but are we going to invest it? We are by paying off all our credit card debts, that's 20% APR, can't beat that! It means we won't be dipping into our emergency fund much and can still tackle debts this month instead of rebuilding our emergency fund.

1 comment:

John said...

Why do you still have a 20% APR credit card?