6 ms·

What does that even mean?

by pbreit 7y ago

gpm 7y ago
Really simplistic view: Before the hour of work I had $10003 of vehicle, $0 in my pocket, and an hour of time. After the hour of work I had $10000 of vehicle, and $3 in my pocket. With the assumption that you are going to eventually pay that $3 back into your vehicle, by paying for repairs or buying a new one, you basically just "borrowed" money from your vehicle.
- chii 7y ago
  > you basically just "borrowed" money from your vehicle. so wouldn't it then make more sense to just sell the vehicle for $10003, then place that money in an interest earning asset like a bond, rather than "borrow" from the value of the vehicle?
  - foepys 7y ago
    No, because you need the cash now. Doesn't matter that you will have thousands more in a few years when you don't have money to buy food now.
    - Dylan16807 7y ago
      So you'd place only 95% of it in a bond. That's not the problem with the idea, the problem is that you need a car.
      - foepys 7y ago
        Which is the means to make money in this case. I don't get how you think you are contradicting me here.
        Dylan16807 7y ago
        The problem is how to turn car-value into cash. You have a car worth $10003 and your current needs can be filled by converting $3 per hour. chii is suggesting you sell the car. That converts the entire car at once. Then you don't have to spend any hours! As an optimization on top of that, they suggest you store the value in a bond, and pull $3 per hour out of the bond instead. The real problem with this idea is that selling the car leaves you with no car. Your objection that "you need the cash now" is based on a misunderstanding of chii's idea. chii's idea does get you all the cash now. It gets you the cash far far faster than $3 per hour. It gets you the cash so fast that you could actually invest almost all of it and pull out $3 per hour and do things you actually want to do during those hours. It's not "buy a bond, have no money today, have more money tomorrow". It's "buy a bond, drain the bond for $3 an hour today, have more money tomorrow". Compared to having 10k under your mattress, the bond has no downside. The bond is not the problem with the idea. The problem is that you have no car.
        beatgammit 7y ago
        What do you need a car for? If it's just to go shopping, consider paying for delivery services instead of being the delivery service. If it's to get to a day job, compare car ownership to mass transit or bike committing. All of these cases can be estimated fairly easily (IRS allows deducting ~$0.50/mile, which is a good first estimate for total cost of ownership per mile). Unless a car is a certain model, it's a liability instead of an asset, so it should be treated like any other expense. If you only use the car for local trips and commuting and taking the bus/biking is doable (perhaps less convenient), then buying a cheap car, keeping a few weeks of food on hand, and taking the bus to work whenever the car breaks down is likely way cheaper than buying a newer, more reliable car. I used to have two cars (married with kids, so one car for each parent), and then decided to start biking to work to improve my health. I noticed that I can bike most days, and the insurance alone was enough to convince me to deal with the occasional inconveniences (e.g. when it snows, I bike to the bus stop). The problem is that most people don't actually do the math and just assume that owning a car is better, when it's not most of the time.
        chii 7y ago
  - JacobAldridge 7y ago
    But then you have no car to get your kid to school (etc).
  - wnoise 7y ago
    If you weren't dependent on the vehicle to be able to travel, sure. Or as a backup home if you get evicted.
    - chii 7y ago
      And this is why working under this scenario, the vehicle is a money losing asset (where every dollar you earned driving costs a dollar in vehicle depreciation, even with a tax deduction, it's still a money losing asset). The deliverer has to be able to earn $1.15 (at least) per dollar depreciated from the vehicle for the work to be "worth it".
      - deleted 7y ago
        [deleted]
      - Drakar1903 7y ago
        The other issue is uncertainty - you have no idea how much you will earn on a given day or if this will be the day your car finally hits one pothole too many and dies.
        beatgammit 7y ago
        But you can estimate it. Record your earnings every day, any compare it by the hour, day, week, and month, as well as miles driven each day. Estimate the total cost of driving (IRS estimate of ~$0.50/mile is a good place to start). Use this simple formula: (Income - expenses) / hours worked = hourly wage Is your hourly wage reasonable? If so, it may make sense to optimize away your expenses and generally stay the course. If it's not, would changing your work hours or location make it reasonable? Unfortunately, I get your feeling that people only look at the income and ignore the rest of the equation (hey, I got $50 tonight! I had to drive 100 miles though...). If you're making $3/trip, you had better drive less than 6 miles or you just lose.
  - smt88 7y ago
    Most Americans can't manage daily necessities (groceries, childcare, doctor's visits, etc.) without a car. Then maybe you ask why they don't have a cheaper car. Generally, a cheaper car costs far more to maintain. The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. But to get that lower cost, you have to temporarily convert more of your money into that car asset. End result: your cash is stuck in your car, and DoorDash/Uber/whatever lets you liquidate it without selling your car.
    - jiofih 7y ago
      This whole economic trap is so undeniably American, it’s hard to deal with the urge to laugh mixed with drear for the people subjected to it :/
      - taneq 7y ago
        The trap’s there for everyone. It was almost certainly a thing in 1800s London before it was ever an “American thing”.
    - amscanne 7y ago
      > Generally, a cheaper car costs far more to maintain. The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. But to get that lower cost, you have to temporarily convert more of your money into that car asset. That’s a poor example, since a Camry is notoriously reliable and needs minimal maintenance. And ten years really isn’t that old. The depreciation on the two year old car would outweigh the maintenance on the ten year old car. I believe that 5-10 years old is the sweet spot for TCO.
    - taneq 7y ago
      > The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. Really? Maybe 10 years ago but cars have become remarkably good recently. I wouldn’t expect a 10 year old car to give you many problems beyond maybe the difficulty of sourcing parts.
      - 7y ago
  - taneq 7y ago
    You think that people who work for Uber Eats are the kind of people who own their cars outright? It’s true, though, that you could look at it as a draw-down on a car loan.
- deleted 7y ago
  [deleted]
Simon_says 7y ago
He's saying: Sure it costs me money to maintain the vehicle, but that's tomorrow's me problem. Today I get cash. It's like you took a loan from yourself with your vehicle's health as the collateral.

What does that even mean?

by pbreit 7y ago

What does that even mean?

gpm 7y ago

Really simplistic view: Before the hour of work I had $10003 of vehicle, $0 in my pocket, and an hour of time. After the hour of work I had $10000 of vehicle, and $3 in my pocket. With the assumption that you are going to eventually pay that $3 back into your vehicle, by paying for repairs or buying a new one, you basically just "borrowed" money from your vehicle.

chii 7y ago
> you basically just "borrowed" money from your vehicle. so wouldn't it then make more sense to just sell the vehicle for $10003, then place that money in an interest earning asset like a bond, rather than "borrow" from the value of the vehicle?
- foepys 7y ago
  No, because you need the cash now. Doesn't matter that you will have thousands more in a few years when you don't have money to buy food now.
  - Dylan16807 7y ago
    So you'd place only 95% of it in a bond. That's not the problem with the idea, the problem is that you need a car.
    - foepys 7y ago
      Which is the means to make money in this case. I don't get how you think you are contradicting me here.
      - Dylan16807 7y ago
        The problem is how to turn car-value into cash. You have a car worth $10003 and your current needs can be filled by converting $3 per hour. chii is suggesting you sell the car. That converts the entire car at once. Then you don't have to spend any hours! As an optimization on top of that, they suggest you store the value in a bond, and pull $3 per hour out of the bond instead. The real problem with this idea is that selling the car leaves you with no car. Your objection that "you need the cash now" is based on a misunderstanding of chii's idea. chii's idea does get you all the cash now. It gets you the cash far far faster than $3 per hour. It gets you the cash so fast that you could actually invest almost all of it and pull out $3 per hour and do things you actually want to do during those hours. It's not "buy a bond, have no money today, have more money tomorrow". It's "buy a bond, drain the bond for $3 an hour today, have more money tomorrow". Compared to having 10k under your mattress, the bond has no downside. The bond is not the problem with the idea. The problem is that you have no car.
        beatgammit 7y ago
        What do you need a car for? If it's just to go shopping, consider paying for delivery services instead of being the delivery service. If it's to get to a day job, compare car ownership to mass transit or bike committing. All of these cases can be estimated fairly easily (IRS allows deducting ~$0.50/mile, which is a good first estimate for total cost of ownership per mile). Unless a car is a certain model, it's a liability instead of an asset, so it should be treated like any other expense. If you only use the car for local trips and commuting and taking the bus/biking is doable (perhaps less convenient), then buying a cheap car, keeping a few weeks of food on hand, and taking the bus to work whenever the car breaks down is likely way cheaper than buying a newer, more reliable car. I used to have two cars (married with kids, so one car for each parent), and then decided to start biking to work to improve my health. I noticed that I can bike most days, and the insurance alone was enough to convince me to deal with the occasional inconveniences (e.g. when it snows, I bike to the bus stop). The problem is that most people don't actually do the math and just assume that owning a car is better, when it's not most of the time.
        chii 7y ago
- JacobAldridge 7y ago
  But then you have no car to get your kid to school (etc).
- wnoise 7y ago
  If you weren't dependent on the vehicle to be able to travel, sure. Or as a backup home if you get evicted.
  - chii 7y ago
    And this is why working under this scenario, the vehicle is a money losing asset (where every dollar you earned driving costs a dollar in vehicle depreciation, even with a tax deduction, it's still a money losing asset). The deliverer has to be able to earn $1.15 (at least) per dollar depreciated from the vehicle for the work to be "worth it".
    - deleted 7y ago
      [deleted]
    - Drakar1903 7y ago
      The other issue is uncertainty - you have no idea how much you will earn on a given day or if this will be the day your car finally hits one pothole too many and dies.
      - beatgammit 7y ago
        But you can estimate it. Record your earnings every day, any compare it by the hour, day, week, and month, as well as miles driven each day. Estimate the total cost of driving (IRS estimate of ~$0.50/mile is a good place to start). Use this simple formula: (Income - expenses) / hours worked = hourly wage Is your hourly wage reasonable? If so, it may make sense to optimize away your expenses and generally stay the course. If it's not, would changing your work hours or location make it reasonable? Unfortunately, I get your feeling that people only look at the income and ignore the rest of the equation (hey, I got $50 tonight! I had to drive 100 miles though...). If you're making $3/trip, you had better drive less than 6 miles or you just lose.
- smt88 7y ago
  Most Americans can't manage daily necessities (groceries, childcare, doctor's visits, etc.) without a car. Then maybe you ask why they don't have a cheaper car. Generally, a cheaper car costs far more to maintain. The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. But to get that lower cost, you have to temporarily convert more of your money into that car asset. End result: your cash is stuck in your car, and DoorDash/Uber/whatever lets you liquidate it without selling your car.
  - jiofih 7y ago
    This whole economic trap is so undeniably American, it’s hard to deal with the urge to laugh mixed with drear for the people subjected to it :/
    - taneq 7y ago
      The trap’s there for everyone. It was almost certainly a thing in 1800s London before it was ever an “American thing”.
  - amscanne 7y ago
    > Generally, a cheaper car costs far more to maintain. The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. But to get that lower cost, you have to temporarily convert more of your money into that car asset. That’s a poor example, since a Camry is notoriously reliable and needs minimal maintenance. And ten years really isn’t that old. The depreciation on the two year old car would outweigh the maintenance on the ten year old car. I believe that 5-10 years old is the sweet spot for TCO.
  - taneq 7y ago
    > The total annual cost of ownership of a 2-year-old Camry is far lower than a 10-year-old Camry. Really? Maybe 10 years ago but cars have become remarkably good recently. I wouldn’t expect a 10 year old car to give you many problems beyond maybe the difficulty of sourcing parts.
    - 7y ago
- taneq 7y ago
  You think that people who work for Uber Eats are the kind of people who own their cars outright? It’s true, though, that you could look at it as a draw-down on a car loan.
deleted 7y ago
[deleted]

Simon_says 7y ago

He's saying: Sure it costs me money to maintain the vehicle, but that's tomorrow's me problem. Today I get cash. It's like you took a loan from yourself with your vehicle's health as the collateral.