Thursday, March 8, 2018

Money Crashers: What “True Cost to Own” Means and Why It Matters

When we first bought what I still think of as our "new" car, about seven years ago, one of the factors I paid most attention to was how much it would cost us to own over the long term. I wanted to know not just how much we'd pay for the car itself, but how much we should expect to spend on gas and maintenance over the time we'd own it. Those "cost to own" calculators on sites like Edmunds were a big help with this, and helped convince me that spending the extra money on a hybrid wasn't worth it for us. (The money we'd spend on the car would never pay for itself in reduced gas costs, and if my goal was to minimize our carbon footprint, I could do it much more cheaply by buying a reasonably efficient gas-powered car plus some carbon offsets.)

Since then, I've done similar calculations for other big purchases, such as our new boiler (for which we chose a moderately efficient model, rather than a hyper-efficient one that was vastly more expensive) and a potential solar array (which we've decided will probably be cost-effective, but should wait until it's time to replace the roof). I've even crunched the numbers for much smaller purchases, like LED light bulbs and even new winter boots.

No one ever seems to talk about "cost to own" for purchases like these, but they really should. Any time you're spending a significant amount of money (whatever "significant" means to you) on a product you expect to keep for a long time, it's worth thinking about how much that product will cost you, not just up front, but over its entire useful life. There may not be cost to own calculators online for appliances or power tools, but it's still worth doing the math on your own.

My new Money Crashers article is an attempt to supply this need. In it, I explain how to decide when cost-to-own calculations are important, and how to perform them for five different kinds of purchases: cars, appliances, computers, tools, and clothing. That's not a complete list of all the products for which the cost to own is worth knowing, but with the techniques laid out in the article, you can figure out how to do the math yourself.

Check it out here: What “True Cost to Own” Means and Why It Matters for Big Purchases

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