Tuesday, 8 Apr 2008
A few weeks ago, Mr. Savvy and I decided that relying on the kindness of friends was getting old when it came to transporting/hauling stuff. So this past weekend, we bought a pickup truck (no, that’s not our truck). Now, one could argue that it would have been cheaper to simply rent a truck for the occasions we need to haul something. However, that’s not really convenient. So let’s see if convenience is costing us.
Around here, you can rent a truck from Home Depot for $19.99/hour. Let’s assume each rental would be for two hours. That gives a cost of $42.38/rental (including tax). Our cost of ownership of the truck for the first year will be $967.20 (purchase, insurance, registration). That means we would have to use the truck 22 times in the first year to break even on our purchase. I’m quite sure that we will use the truck at least that much this year because we have a couple of landscaping projects we’d like to complete.
For subsequent years, the cost of ownership will drop to $367.60 (insurance, registration) which will only require 9 uses to break even. Once again, I believe we’ll use the truck at least that much. Note that I didn’t include the opportunity cost (cost of using funds to purchase the truck upfront vs saving or investing). I didn’t want to overly complicate the calculations. I also didn’t include gas or maintenance. These costs will be neglible since the truck won’t be driven much (in terms of mileage) and can be considered the ‘cost of convenience’. So it seems that financially and otherwise, it was worth it to purchase the truck.
This type of calculation can often be useful when decided whether or not to make a purchase or when evaluating various options. Of course, it would be wise to make this calculations BEFORE you actually make a decision 
April 8th, 2008 at 11:48 am
I would think you would need to factor in the depreciation of the value of the truck as well into your calculations. That could be thousands per year depending on if the truck was new/used and the purchase price.
Hi Chuck. Thanks for reading. I didn’t bother to include depreciation because the purchase price was so low (under a thousand). I did include the total price in the first year’s cost of ownership though.
April 8th, 2008 at 5:00 pm
I hate borrowing from other people. The truck will come in handy and it’s not like you have a car note. Wish you lived in South Florida so I could borrow it. heheh.
Yeah, the final straw came when we were standing outside Bed Bath & Beyond with a large box that wouldn’t fit in the trunk. We had to call a friend who (luckily) was in the area and ask her to transport it for us. Just a teeny bit embarrassing
April 11th, 2008 at 12:29 pm
My <$1000 beater truck, insured at the legal minimum (no collision) for my no-fault state at the “recreational” mileage rate, activated the multi-car discount and caused my total insurance bill to go DOWN by twice as much as the annual registration. Depreciation is negligible. A running, driveable truck is usually worth about $1000 to someone regardless of age and mileage.
I bought mine from a co-worker asking over $2000 for it with a sign in his yard, but it wouldn’t start because it needed a new $50 battery, turning off buyers. He was leaving on a Mexican vacation at the end of the week so I offered $800 “as is” cash-in-hand (not a check) before he left. I even pointed out the offer was way low-ball, and with a battery and ad in the paper it would surely bring much more, albeit not from me, and not before his vacation.
He happily accepted, the extra money made a great vacation even more memorable, and he was as glad to be rid of it as I was to get it. Patience often reveals great deals that make everyone happy. I’ve been evaluating it for two years now, and the purchase is still firmly in the wise column.
April 12th, 2008 at 12:11 pm
TAG! You’re IT!
April 12th, 2008 at 9:02 pm
For many years, I couldn’t justify having truck as an extra vehicle. 5 years ago I bought a truck and made it my only vehicle. It was a great decision. It gets 20 miles to the gallon and can haul just about anything, from mulch to furniture.