Whenever I plan to buy something expensive, I go through this exercise of figuring out the cost of owning something. Remember that for most material things in life, the cost of owning it is not just the sticker price. There is more to owning it. After running through the exercise objectively if I still feel the need to buy something, I sleep over it. Gives a bit more clarity on the subjective aspects. Some things are an absolute necessity and I am not talking about those ones. Moreover, what is a necessity for me may be a discretionary spend for someone else. Finally, there is no point doing this exercise if the cost of the thing you want is cheap and doesn’t affect sustainability too much. Again, for some sustainability may be important, for others it is not.

The cost of owning something differs quite a bit depending on what the item is. Take for example buying a new car vs keeping your old car. This was something that I had to do recently. There will be some grey area when doing the calculations, so it is not all fair and objective. So lets start with some numbers. If I decide to buy a new car, the price would be around Rs. 6L after exchanging my old car. Then these would be the costs of owing a new car

  • Assuming 10% annual return on investment on Rs. 6L, I will be forgoing about Rs. 60K/year as income.
  • Next major cost is the increase in insurance which goes up because the newer car will cost more. I assumed about Rs. 5,000/year more than my current insurance.
  • Then there is depreciation cost of the car. This one is hard to calculate because it depends on how much you drive your car and how you maintain it etc. Lets say it loses about 10% of the value every year.

Just based on that information and assuming I will keep the car for at least 10 years, the cost of ownership comes to Rs. 9L + Rs. 50K + Rs. 2.5L = Rs. 12L. Instead, if I had repaired my old car and managed to get the registration renewed, I would probably spend about 1L for the 10 years. In addition I will lose its complete value in depreciation because it will be considered junk at that point. At the time of buying a new car, I estimated my old car to sell for about Rs 1L, so that would become zero. Overall, I would spend about 2L. The difference between owning a new car and old one is a huge Rs. 10L! Yet, not everything can be so objective.

Some things are more subjective and some fall in the rough calculations. Take for example how much money the improved fuel efficiency of the new car could save? Hard to calculate but you know it is something. Similarly, the maintenance of an old car will be higher due to normal wear and tear, so there will be those expenses. How about the reduced pollution because the new one is BS VI compliant engines where as the old car was BS III compliant. However, buying a new car means more waste, even if my car goes to someone, they may be dumping their old car or scooter or something.

Next there is the ride safety and comfort to consider in the new car as compared to old one. You should also weigh in whether the old car is serving the intended purpose, which for me is to have a higher road clearance, more boot space, softer engine and general tech upgrades (ABS, EBD, rear parking sensors, music system etc) that I did not have in my old car. I am sure there will be a few more things to consider depending on your needs. In my case, the subjective reasons overweighed the objective ones and I went with a new car.

You can apply the same procedure before buying anything. Take the case of buying a new laptop for example. You could exchange your old laptop, spend a bit more on top of it and buy a new one or continue with the old one. If you go for a new one, you will have to spend extra and you will be foregoing the income. You would be contributing to e-waste etc. On the other hand you could be more productive with a new one. If the old laptop is not working, then you have to consider whether repairing is better or pay up for a new one.You have to weigh in the objective vs subjective pros and cons and decide which way to go.

On the topic of e-waste, if the things we buy can easily be upgraded, it would help extend the life. For example, many times, the battery is the one that dies first on most of the electronics like phones and laptops. If there was an easy way to swap the battery I would gladly keep the device for longer. Likewise, if the screen on the phone can be easily replaced like in a modular phone, that would extend the life even more. I don’t care much about the phone’s processing power as much, so no need to upgrade memory or CPU. If it was a laptop, there should be a way to upgrade CPU, GPU, screen in addition to RAM and SSD like the Framework laptops.

That does not mean that the modular device can be so expensive that it is cheaper to just buy a new one in the future. It is a delicate balance but I wish it was possible. Anyway going back to the point of owning things. In some cases you don’t even have to think about the cost. It is just about conscience. You may feel buying a pair of new shoes while the old ones are still working is a bad idea because it contributes to waste. But if the one that you have is hurting your feet, there is no point thinking about waste and just go buy the new one. In some other cases, you have to consider the long term effects. Say you want to buy an extra couch., then you will lose space in your house permanently to that couch. The lost opportunity is that you could have bought something else more useful which would occupy less space. In addition, the up keep, cleaning etc are all part of the long term cost of owning it.

Every time there is a sale like the most recent Amazon and Flipkart sales, I get tempted to upgrade something or the other. I have to bring myself to do this exercise and bring some sanity to myself before drooling over the amazing deals :). Once I think through, usually I don’t feel the need for checking out the deals and if I ever feel like I want something, sleeping helps. The next day the temptation is not as high. Every business in the world is designed for consumerism using various tactics. So the burden is on us to think through.