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PaperclipPerfector  3d ago (text post)   1773 thread views

Small-Scale Question Sunday for October 13, 2024

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For me it all comes back to what kind of cash flow you need. Depreciation notwithstanding, if I lose my job I’d much rather have a car that’s losing value on paper than have a monthly payment I need to make.

That's just a way of saying you'd rather have savings than not. It doesn't tell you anything about the merits of owning versus renting a car.

It’s related but not quite the same. If my savings are in the market for instance and I’m let go because of a recession, suddenly my obligatory expenses could mean I have to sell at the worst possible time.

I’m not saying renting is never a good idea but racking up fixed expenses poses risks.

Why would selling your car be any better? Its value will be equally affected by the recession.

Yeah, but you don't have to sell your car. Savings and a fixed expense means you're vulnerable on both sides. Your cost of driving can go up, and your savings lose value at once. Owning a paid off car is locked in on cost of ownership. Sure, it can break down, but market fluctuations are irrelevant to you.

Seems like you're talking about owning property as a 'hedge' against economic downturns to the extent that, say, physical assets have intrinsic value to you whilst money held as equities can 'disappear' in a market crash.

And there's probably some logic there.

Yeah that’s a good way to put it. Ownership is a hedge.

This could be presented as a solid argument. Renting also means the real owner can take back their property under certain conditions, leaving you with nothing even if you technically still have the money to cover it.

So you would want to own the basic equipment that allows you to be economically productive so changing economic conditions won't immediately kneecap you.

Right, exactly. I watched a talk from Elizabeth Warren when she was a professor about this years ago. She encouraged people to splurge on things like restaurants and vacations rather than cars and houses because if things go south you can easily just not go out to eat versus having to unwind an expensive car or house payment.

Similar logic applies here I think.

Also it seems like in most cases the lifetime spend for renting dwarfs the cost of ownership.

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