3 ms·

This model does not work very well for consumers. It really does raise the prices of goods and drains consumer income and forces an opportunity cost of not inve

This model does not work very well for consumers. It really does raise the prices of goods and drains consumer income and forces an opportunity cost of not investing in retirement, and not paying down mortgage faster (for example). It's almost always better for consumers to lay out the capital up-front and own the item. For businesses, the calculation is different. Maintaining appliances, or cars, or coffee machines, means redirecting resources (that you're already paying for) away from building widgets to something that isn't your core competency. Plus you get a bit of a discount because you're working with pre-tax capital. Again, it's why car leases make sense for business, but are a terrible deal for consumers.

pbnjay 6y ago
Paying $10-20/mo for a fridge is not going to significantly impact retirement savings over the long term. The alternative is putting that little bit extra into savings every month to buy the next fridge when it breaks. It balances out.
- bawolff 6y ago
  But your fridge is not the only thing you own. Presumably you would do this for all your appliances. Keep in mind, that $20 a month for 40 years at 4% interest is $23000. If you add in more appliances this scheme can add up to be surprisingly expensive.
- macspoofing 6y ago
  >Paying $10-20/mo for a fridge is not going to significantly impact retirement savings over the long term. First, your numbers are way too low. Nobody is going to lease you, for example, a $2500 fridge where the capital cost will take 20 years to be paid back, especially since cost of service, depreciation of asset, and profit, needs to be priced in as well. You'd be looking at something on the order of $50/mo. The opportunity cost of putting $50/mo into a tax sheltered investment account (with a reasonable 6% return) is around $15,000 after 15 years. In other words, you paid $15k for a fridge that retails for $2500. > The alternative is putting that little bit extra into savings every month to buy the next fridge when it breaks. It balances out. Huh? If you're overpaying for an appliance, you don't really 'fix that' by saving more.

pbnjay 6y ago

Paying $10-20/mo for a fridge is not going to significantly impact retirement savings over the long term. The alternative is putting that little bit extra into savings every month to buy the next fridge when it breaks. It balances out.

bawolff 6y ago
But your fridge is not the only thing you own. Presumably you would do this for all your appliances. Keep in mind, that $20 a month for 40 years at 4% interest is $23000. If you add in more appliances this scheme can add up to be surprisingly expensive.
macspoofing 6y ago
>Paying $10-20/mo for a fridge is not going to significantly impact retirement savings over the long term. First, your numbers are way too low. Nobody is going to lease you, for example, a $2500 fridge where the capital cost will take 20 years to be paid back, especially since cost of service, depreciation of asset, and profit, needs to be priced in as well. You'd be looking at something on the order of $50/mo. The opportunity cost of putting $50/mo into a tax sheltered investment account (with a reasonable 6% return) is around $15,000 after 15 years. In other words, you paid $15k for a fridge that retails for $2500. > The alternative is putting that little bit extra into savings every month to buy the next fridge when it breaks. It balances out. Huh? If you're overpaying for an appliance, you don't really 'fix that' by saving more.