Exactly. Every time I’ve had an auto loan, the vehicle was still worth quite a bit and ran fine when the loan was paid off. Meanwhile, I was able to get to work and other places.
Yeah except that equipment will last over half a century or more. I have worked on metal presses that were almost 19th century and know people who have worked on ones from the days of wood computers of the 1870s. Heck the OEM I work for was originally running everything off belts. One motor moving energy around with belts in the floor and ceiling.
You can’t compare the two intelligently. Especially since safety standards keep rising and there isn’t practical methods to make those old vehicles safe. Metal presses for example, gates and light curtains. No big deal. Try taking some car from the 1950s and adding airbags and a crumble zone. I imagine it is remotely possible to do it but not widespread.
Useful life depends on the type of equipment. I’m sure there are some metal presses that last a hundred years, but there is plenty more equipment that has a useful life measured in years, especially high-tech equipment.
The iPhone is only 15 years old, how much of the equipment used to build the original model do you think is still in use?
Same is true of non-manufacturing sectors. For example, a hospital might issue bonds in order to build a new clinic or hospital wing. Much of the hospital equipment bought with those bonds will be replaced within ten years.
Well yeah it depends, I always tell my clients that the moment we have to add a touchscreen they have to prepare to have a problem within 5 years. Which is why I push them to consider the extra warranty if they go that route. Most do some don’t.
It’s still not a great comparison. Individuals aren’t too big to fail.
The point is that depreciation is not the most important consideration when considering whether to finance something.
The most important consideration is the return on investment. If the equipment will allow you to make more money than you pay in financing plus depreciation, then you should buy it today even if it requires financing. You’re not buying it because you expect it to appreciate.
And if you use a car to get to work, then the return on investment is your entire income. So if you need to finance a car to get to work, then finance it.
Right but people don’t work the way businesses do. If everyone bought a car only when they needed a car to get to work and back the world would be much much different.
So many people at my work make a third of what I make and I see their giant pickups. Me? I drive a small economy car.
Getting a loan on a depreciating asset…
Is how most people afford vehicles. You paid for yours in cash?
Exactly. Every time I’ve had an auto loan, the vehicle was still worth quite a bit and ran fine when the loan was paid off. Meanwhile, I was able to get to work and other places.
All 2k of it my FIL’s still dailies a £500 Citroen Picasso that’s from 2004.
Not them but every vehicle in my life except one in cash. I don’t trust banks and credit is evil.
If you rely on your vehicle to get to work, an old beater is a false economy.
I would disagree with a 15-year-old car that is well maintained. New cars go wrong all the time too.
Incorrect. You are saving a fortune on insurance and no interest in car payments.
You’re also unemployed because you can’t reliably show up to work, you absolute dunce.
Nope.
Excellent counter point, you really changed my mind.
… is normal.
Look inside any manufacturing facility. All the pieces of equipment are depreciating assets, often purchased after issuing debt.
Yeah except that equipment will last over half a century or more. I have worked on metal presses that were almost 19th century and know people who have worked on ones from the days of wood computers of the 1870s. Heck the OEM I work for was originally running everything off belts. One motor moving energy around with belts in the floor and ceiling.
You can’t compare the two intelligently. Especially since safety standards keep rising and there isn’t practical methods to make those old vehicles safe. Metal presses for example, gates and light curtains. No big deal. Try taking some car from the 1950s and adding airbags and a crumble zone. I imagine it is remotely possible to do it but not widespread.
Useful life depends on the type of equipment. I’m sure there are some metal presses that last a hundred years, but there is plenty more equipment that has a useful life measured in years, especially high-tech equipment.
The iPhone is only 15 years old, how much of the equipment used to build the original model do you think is still in use?
Same is true of non-manufacturing sectors. For example, a hospital might issue bonds in order to build a new clinic or hospital wing. Much of the hospital equipment bought with those bonds will be replaced within ten years.
Well yeah it depends, I always tell my clients that the moment we have to add a touchscreen they have to prepare to have a problem within 5 years. Which is why I push them to consider the extra warranty if they go that route. Most do some don’t.
It’s still not a great comparison. Individuals aren’t too big to fail.
The point is that depreciation is not the most important consideration when considering whether to finance something.
The most important consideration is the return on investment. If the equipment will allow you to make more money than you pay in financing plus depreciation, then you should buy it today even if it requires financing. You’re not buying it because you expect it to appreciate.
And if you use a car to get to work, then the return on investment is your entire income. So if you need to finance a car to get to work, then finance it.
Right but people don’t work the way businesses do. If everyone bought a car only when they needed a car to get to work and back the world would be much much different.
So many people at my work make a third of what I make and I see their giant pickups. Me? I drive a small economy car.
Mine paid off about 18 months ago after 5 years at 2.42%. I feel like that was the better move even if I’d had all the cash to put in.