Updated on 05.01.09

# The Logic of Up-Front Spending

I tend to be an advocate of spending more up front on a large purchase if that purchase will have lower maintenance costs. For example, if I’m buying a car, I’ll spend more on one that has great gas mileage than an equivalent one with poor mileage (which is part of why we bought a Prius, actually), or if I’m buying a washing machine, I’ll pay more for one that uses less energy and less water. There are two pieces worth discussing here.

First, my biggest motivation when making a major purchase is the total cost of ownership. In other words, in my best estimation, how much money am I going to have to invest in this item over its lifetime, including the initial cost, regular maintenance costs, energy use, water use, and so on.

Here’s an example. I’m looking at two different washing machines. One uses 40 gallons of water per load and has an energy use of 550 watts, with a load time of thirty minutes. Another one uses 20 gallons of water per load and has an energy use of 320 watts, also with a load time of thirty minutes. I turn to Consumer Reports and it indicates that the first machine has average reliability and the second has excellent reliability. But the first washing machine costs \$300 and the second one costs \$600. Which one do I buy?

Well, what’s the total cost? Let’s say I do five loads of laundry a week and I want the best value over the next fifteen years. The first machine would use a total of 156,000 gallons of water – and with water costing \$3 per thousand gallons, that’s a water cost of \$468. The second machine would use a total of 78,000 gallons of water – and with that same \$3 per thousand gallons, that’s a water cost of \$234. On electricity, the first machine would use 1072.5 kilowatt hours of energy, and with electricity at roughly \$0.11 per kilowatt hour, that’s a lifetime energy cost of \$117.98. The second machine uses 624 kilowatt hours of energy, which would cost \$68.64.

Adding these up, the first machine (the less reliable one) has a total cost of \$885.98, while the second machine has a total cost of \$902.64 – roughly the same. Given that the second machine is more reliable, the choice is easy – I’ll buy the \$600 one and leave the \$300 one at the store.

There’s another factor at work here, too, though. Once the purchase is made, the more expensive machine has a much lower cost per month of use.

Over a given month, the “cheap” machine would run 20 loads – a water cost of \$2.60 and an energy cost of \$0.66, totaling \$3.26. The “expensive” machine, over those same twenty loads, would cost \$1.30 in water and \$0.38 in energy, totaling \$1.68.

Every single month, without thinking, my bills go down \$1.58 – and that fraction will go up as energy prices and water prices rise over time.

It’s a very simple example – and it seems like a small amount. It is a small amount. But it’s a reduction of \$1.58 in spending every single month, like clockwork. I simply don’t have as much required spending.

Let’s extend that idea a bit. Let’s say I apply the same philosophy to all of the major appliances in my home. I spend a bit more to get the more efficient air conditioner, the more efficient furnace, the more efficient dishwasher, the more efficient clothes dryer, hot water heater, oven, refrigerator, deep freezer, car(s), lawn mowers, computers, microwaves, windows, doors, and so on. All of those purchases will each contribute a bit to lower my energy bills – and the cumulative effect is quite large.

To me, there’s extra value in that savings beyond mere dollars and cents. To put it simply, it’s very hard to tell what one’s future holds. You may succeed in your endeavors, of course, but our health is always a risk, as is our continued employment. Ensuring a lower monthly cost of living in the future is a bit of insurance against these things. It’s also a hedge against inflation, since over time, energy costs and water costs will rise.

Given these factors, if the total cost of ownership of two items is similar, I will almost always choose to purchase the item that is more expensive up front. It’s a great rule of thumb to apply in any purchase, given the uncertainty of the future.

1. Jason G says:

Great article, Trent. I actually learned this from my grandmother many years ago and is one of those great life lessons. Pay a little more now for a quality product, pay a lot less later on.

2. Jimbo says:

This article completely ignores the time value of money. What if you took the extra \$300 it costs to buy the more expensive washing machine and structured it so that you receive periodic payments over the life of the washing machines…

3. Johanna says:

And yet, you chose a financed Prius (less expensive now, but higher monthly expenses later) versus a paid-for-in-cash Prius (more expensive up front, lower monthly expenses later). And you explained that decision by talking about the virtues of having lots of cash on hand.

Trent, I am not nitpicking just to nitpick here. I read this blog every day and I think it’s great. But when you present “rules of thumb” that actually contradict each other, it becomes very hard to take you seriously.

4. BirdDog says:

Good luck on that Prius justifying your points. The Prius my company bought has a headlight that is going out. No big deal, right? Haha, wrong! Apparently you have to take the whole bumper off to get to it and it uses some kind of special bulb that costs like \$300. Hmmm…I can buy a lot of gasoline for the difference between a \$5-\$10 bulb and a \$300 one.

5. Jason G says:

@ Johanna: You are comparing apples to oranges. Trent went through his thought process on why he chose the Prius in the first place, which was mainly to offset the high cost of fuel. (Pay more now, save later) Then he explained the rationale behind why he chose to finance the purchase. He was willing to pay a little more for the comfort of having the larger EF on hand. Totally understandable. The fact that he chose to finance the Prius does not negate the fact that he chose the Prius in the first place due to the lower costs in the future. His costs per mile driven on the Prius will be lower than a regular mid-size sedan, barring any major repair work.
I don’t see where there was any contradiction.

6. Joseph Tanner says:

This is something I still have a lot of trouble with. Too often I go for the cheapest solution, it doesn’t work out, then I end up getting the more expensive product anyways. If I’d just go straight to buying the more expensive product, I’d save a good bit of money.

7. Trent says:

“And yet, you chose a financed Prius (less expensive now, but higher monthly expenses later) versus a paid-for-in-cash Prius (more expensive up front, lower monthly expenses later). And you explained that decision by talking about the virtues of having lots of cash on hand. ”

I had the cash on hand to pay the whole balance. I chose to keep the money in a savings account because I’m quite confident it will earn more than the 4% it would have earned had I stuck it into the car loan. That has nothing to do with total cost of ownership – you’re comparing apples and oranges.

8. Johanna says:

@Jason G: Let’s put it this way. Take the washing machine example. Suppose you had the opportunity to make a \$300 down payment on the \$600 washing machine, finance the other \$300 at a low interest rate (say 5-6%), and keep the extra money in your emergency fund for the time being. Would that be a good idea? Would it be a better idea than buying the \$300 washing machine?

9. Dave says:

Given that the lifetime costs are similar (and ignoring for a moment the reliability factor), it seems silly to prefer spending money upfront over spending it later. You could put that \$300 to work in an investment, or have it as piece of mind in an emergency fund.

10. Mary W says:

Another consideration in deciding which appliance to buy is the environment. In southern California we are starting to ration water (as well as raise the price). That would be another point in favor of the washing machine that uses less water.

I’ve just finished getting solar electric installed. It may not make total sense from a strictly frugal perspective (pay up front with a payback time of 12-15 years) but from a green perspective it does. OTOH if electric costs keeping going up it might recupe cost sooner.

11. Maureen says:

@Johanna:

My sister did the same as Trent. She had the money to pay for a second-hand car in full but decided to have it financed because it was 0%. It’s a nifty car with great reviews and a great MPG on it too so it’ll also save in the long run. She knew she’d earn more in a savings account on which (at the time) she was earning over 6%.

12. Michael says:

So…what is the return in a savings account on the money from water/electricity savings? Also more than 4%?

Apples and apples!

13. Johanna says:

@Maureen: I’m not saying that it can never make sense to take out a loan for a car with good fuel efficiency. (Certainly, if she got 0% financing, that sounds like a good deal.) What I am saying is that you cannot generalize, because “it’s always better to lower your monthly expenses” and “it’s always better to keep more cash on hand” can’t both be true.

14. MoneyEnergy says:

Thanks for the reminder, Trent – I agree. It takes real planning and effort and foresight, but this is the ideal situation to be in. I’ll keep it in mind for when I’m in the position to buy a car next.

15. Michael says:

Excuse me, I meant the extra money spent on the unit vs. the water/electricity savings.

16. PJA says:

I find that for these up front type purchases calculating the net present value and the internal rate of return is really handy to compare which up front investment is most effective (in terms of percentages, not dollars).

I recent purchased a universal battery charging station with 68 rechargeable batteries of all types. Less waste (these batteries can apparently be recharge a 1000 times) and a nice return on the investment.

The table is below and the excel and MS works spreadsheet both have the required formulas built in.

Capital Outlay Battery Charging Station
Year 1 Savings (\$189)
Year 2 Savings \$60
Year 3 Savings \$35
Year 4 Savings \$35
Year 5 Savings \$40
Year 6 Savings \$35
Year 7 Savings \$35
Year 8 Savings \$35
Year 9 Savings \$40
Year 10 Savings \$35
Year 11 Savings \$35
Cost of Money (4% lost by not sticking it in the bank) \$35
Total Inflows \$420
Net Present Value Of Inflows \$324.05
Internal Rate Of Return 18%
Profit Per Labor Hour \$27.01

17. Russ says:

Trent,

This is a poor example. You’re saying that it’s better to spent \$300 up front so you can save 1.58 per month or 18.96 per year for the next 15 years. Unfortunately this is overly simplistic, even for The Simple Dollar, and completely ignores the time value of money. The only way you break even is if you are assuming a discount rate of 4% or lower and assuming your water and electricity rates increase at an above average rate of 6% (twice the rate of inflation, but given what is happening in the west this might be about right) or greater.

The above 4% discount rate and 6% growth rate would give you a present value of \$322 over the 15 year life, but I don’t know anyone that would use such a low discount rate. A much more typical 8% or 10% discount rate would give you a present value of \$240 or \$209, which is much less than the \$300 you started with.

While you had a good idea, I think a little more analysis would have gone a long way in this article.

18. ed says:

technically, you should count the lost interest income from spending the extra \$300 up front since you’re unable to otherwise invest that money. unfortunately, that’s not necessarily an easy calculation since you’ll be drawing off of that \$300 over the life of the cheaper product to pay for the additional operating costs. however, for large items it may make a big difference.

19. Troy says:

The downside to your argument regarding the washing machine, the Prius, and other “efficiency” reasonings is the inducement of consumption.

The Prius, The washing machine, and other efficient appliances are beneficial mainly based on the reasoning that the more they are used, the better the decision will be because the less the ongoing “usage” expense is.

But why not instead simply drive less. Or wash less. Then you win on multiple fronts

See, I would buy the \$300 washer, wash clothes 3 times per week, and come out ahead. I would save energy, save cash, and not wear out whatever the item is as quickly.

The washer (and Prius) being efficient, and using that efficiency as a major basis for purchase only promotes additional usage to justify the decision to purchase in the first place.

20. Joey says:

Troy nails it. The fact that you’ll need to drive the Prius for hundreds of thousands of miles over several years just to break even with a cheap used car (never mind exceed it) shows how much rationalization is necessary to defend the purchase.

It’s not that hard to do the math. My used car gets 15 miles per gallon, but it cost \$2000. Your (now) used car gets 45 miles per gallon, but it will cost you over \$22000 before you even own it. You’ll have to make up \$20,000 dollars in fuel just to break even with someone who bought the \$2000 car. That doesn’t even begin to touch the exorbitant costs of insuring a brand new vehicle, nor the increased costs of repairing newer vehicles compared to older ones.

You can rationalize your personal life for as long as you’d like, but in the end, your own financial advice will continue to contradict your actions, and the hypocrisy will continue to be apparent to anyone reading your blog.

21. k2000k says:

Im split on this idea, like some I found Trents Prius analysis lacking. I live in an urban area were I walk so mileage doesn’t matter as much as maintenance costs, and echoing the sentiments of a previous poster, hybrids can have significant costs when it comes to the uniqueness of the vehicle, such as replacing their batteries which are far more expensive than a conventional vehicle, though for Trents defense on the washer; given he has young children I don’t think reducing the number of washes is a viable option given that cloths with stains cannot be re-worn and young children are very prone to stains

22. Faculties says:

I’d be interested to know where the savings account is that’s going to clear you more than 4%. My credit union savings account is paying a top rate right now — 3.25%. Take off a third from taxes and you get around 2.25%. To clear more than 4% after taxes, you’d need an account to pay more than 6% as a base rate. Or maybe you don’t make enough money for that tax bracket; if you’re in a lower tax bracket, you might need “only” 5% interest to clear 4% after taxes. Please let us know where the 5% interest accounts are. The highest regular account Bankrate.com lists is 2.08%. Paying off the Prius — or saving till you could have a paid-off Prius AND an emergency fund — would have been more profitable.

23. k2000k says:

And calling Trent a hypocrite is far too harsh. I for one wouldn’t put young children in a \$ 2000 hunker.

24. MLR says:

Surprised to see the Prius battle still waging on.

The washing machine argument is an interesting one, but at those savings I wouldn’t (personally) choose the more expensive one.

I figure they both came with the same length of warranty, right?

25. Karen M says:

Trent,

Where ARE you getting that great interest rate on your SAVINGS account? I think this has been asked in a few comments sections in the past, so forgive me if I missed your answer, but please– do tell again.

26. Eli says:

This is absolutely ridiculous.

I enjoy reading your blog but you are flat out wrong here. The total cost of ownership (as you call it) MUST include the opportunity cost of your spent money.

As you’ve pointed out, the yearly cost of the cheap dryer is just about \$40 and that of the expensive dryer is about \$20. Over the 15 year life of the dryer the costs are both around \$900. Another way to put this: it’ll take 15 years before the break even point on this purchase where you’ll start to save money by going with the costlier dryer.

The monthly “savings” you allude to with the \$600 option are fallacies until you get to 15 years, and even then it’s still the wrong choice.

What you should have done: Take the \$300 you’d save by buying the cheaper dryer and put that into a low fee index fund, etc. 15 years later, when your dryers are in need of replacing you’ll have nearly \$1,000 in your fund if you’d gone with the cheaper option and invested the remainder(AHR).

Even if the cheap dryer had a massive breakdown at year 9, being it’s so much less reliable, had you invested those savings you’d still already have \$600 in the bank for a replacement.

Say there’s a huge hike in gas and electric. If it doubled tomorrow morning your break even point (not accounting for opportunity cost) would come sometime in year 6 instead of 15. Say it quadrupled, it’d come in year 4. EVEN WITH RATES 4 TIMES AS MUCH, the \$600 dryer will always cost you more than the \$300 dryer plus the money you’ve saved and invested, always.

Apply this philosophy to all of your major appliances, your car, your…..

Don’t even get me started on the people that didn’t have that extra \$300 to begin with for the spendier drier so charged it!

There IS genuine value in reliability/quality but that difference in reliability must closely mimic the difference in price before it’s a factor. Had the price been much, much closer on these items you may have had a case. I’ll also admit to the fact that most people won’t invest that extra \$300. They’ll buy the cheap option, end up having it break, lose money, repeat.

And, I’ll agree that this doesn’t include the greater social cost of using more efficient appliances to save our planet, feel good, etc. But, then again, the article wasn’t called “The MORALS of up front spending” was it?

Again, I genuinely enjoy reading your blog and don’t mean this to be confrontational. I wouldn’t have said anything if i didn’t hold your blog and its readers in such high regards.

27. lucho says:

After reading the article I came up with the opposite conclusion.
5 loads a week is a lot, we do less than that. And betting you’ll keep the machine for 15 years is a tough bet. And you won’t be able to take advantage of the new advance in technology, the new machines saving even more water and electricity.
The only reason to buy the expensive machine would be the warm and fuzy feeling to save water and energy now and think you are green and doing good for the planet. But financially you demonstrated it doesn’t make sense.

28. SteveJ says:

I think the reason this discussion keeps coming up is that Trent has inherent values that others do not share as strongly (and vice-versa). In my not-so-professional opinion, Trent puts a LOT of emphasis on resource conservation and “green” choices. He still approaches them from a consumer and convenience position, but I think it’s clear he’s willing to pay more money to reduce consumption elsewhere. This does not go to the further step of doing fewer loads of laundry or driving less as Troy said. I think that’s fair, Trent said up front with both purchases what his expectations were (driving to see family very regularly, doing 5 loads of laundry). Obviously he could maximize his finances at the cost of some other value.

In Houston, you have the option to “buy” wind or another form of renewable power and pay about 50% more for your electricity. From an accounting standpoint, this is obviously insane, as your house actually gets the same electricity your neighbor is getting, but kudos to those that feel that strongly.

As recently as a couple years ago, I felt successful bloggers had a responsibility to be as absolutely correct and irrefutable as possible in expressing themselves. I felt this way mostly because they’re in a position of power and thus have a responsibility due to the large audience they reach. I’ve since come down on the other side, it’s a blog, it’s the author’s opinion, and anyone that’s dumb enough to walk away with information from the internet and treat is as immutable pretty much deserves where that will take them.

Regardless if I agree or not, I appreciate Trent sharing his opinions. I appreciate the commenters that express theirs. Very seldom do I come away from a blog article or comment thinking: “Wow that person nailed it and their point-of-view cannot possibly be improved upon.” I’d hope we read the blog to learn and think rather than to “win”.

29. Buy a used washer. People get rid of perfectly good ones all the time when they move or get married. Buy a good one for \$100, or buy a junker for \$25 and learn how to fix it.

30. BJD says:

Trent – I’m surprised you would choose the more expense model in this example. After reading your blog for about a year I would have pegged you for the ‘bird in the hand’ and guessing you would have purchased the less expensive model and put the \$300 difference into your emergency fund incase you did have repairs, etc. Instead you’re choosing to pay double and hoping/planning to make it up over the lifetime maintenance fees.
I’m surprised because in your example there is virtually no savings until year 16 and for most washer/dryers that is the end of life for them.

When comparing models I follow similar logic to you – I’m slightly different because I tend to look at the year cost and then calculate how long till the yearly savings (of the higher priced option) covers the cost difference. Difference but still very similar to your approach.

In your example, you make money if your washer lasts longer than the 15 year average – but you’ve paid more if the washer lasts only 15 years or less. Although you’re in a better position when electric/water prices increases and when your laundry volume increases.

31. Jerryb says:

Trent forgot to factor in repairing said washers. That \$300 and less reliable washer will cost more in repair bills during it’s 15 year life (if it lasts that long) than the more expensive model.

Washing fewer loads isn’t always an option when you have to children running around the house. I do 5 loads of laundry just for myself, but then again I have a job that results in dirty, sweaty clothes 5 days a week.
He nailed the cost of electricity and water going up over the years, but failed to also factor in the possibility of child #s 3 & 4.

32. Marc says:

*Sigh* I can’t believe the Prius debate is still going.

The point of this post is to consider the long-term consequences of a purchase, yet some people are still being short-sighted: currently the economy is in the dumps, interest rates are at unseen lows. Part of the cost-analysis for the Prius involves anticipating the cost of fuel and interest rates over the next 10 years.

Odds are fuel costs will increase over time, and considering where they were a year ago, it could happen quite quickly. Interest rates are low now but for many reasons they will probably rise significantly soon. Even if they only go to the historic average, that’s around 5%.

So if in 2, 5, 7 years gas is 5 bucks a gallon and ING is paying 5% on accounts it’ll be a great decision. If you don’t believe that’s what the future holds then fine, but it’s unfair to call Trent a hypocrite because he’s factoring these things.

33. Carlos says:

One other factor you should take into account is the cost of buying water. I buy from a public utility; the minimum quantity that can be purchased, monthly, is 750 gallons (100 cubic feet). I bought a ‘green’ washer (at considerable cost vs. a standard model) several years ago (which uses only 12 gallons of water per wash).

As it turns, out, the regular washer would have had equal operating costs, based on my low over-all water usage (I work out-of-town, and am home only about 10 days/month). Using 300 gallons or 729 has the same cost direct cost to me, though it may be ‘better for the earth’

34. Coupon Artist says:

I agree.. you have the money now, so you might as well spend it to lower the costs later when you might not have the money.
Can’t you also get tax deductions for some purchases, if you chose more energy efficient models?

35. Kate says:

Trent…I’m not saying that you should avoid conflict on your blog but I have started cringing every time you even mention your new Prius or car shopping in general.

36. Guido says:

Yeah…the Prius argument there is a little lame my friend.
As an owner, i can promise you the repair cost and God forbid a cell malfunction (talking upper thousands, very very expensive stuff) are not wise. In fact, if you have thought this out a bit more clearly, you’d see that this isnt apples and oranges. Its exactly what your preaching against..you cannot predict the cost of fuel..next year it could be 99 cents…OR 4\$ a gallon. Despite the alarmist eco-friendly, global warming mania, the prius was a poor decision in the long run.
I think you should have just said strait out you wanted to plug your “green-ness” and used the washing machine as a more appropriate and truer example…

37. Buffalo says:

I’m surprised that total cost of ownership arguement wasn’t brought up concerning Macs and PCs. Our Mac is 6 yo, and with the exception of the yearly Turbo Tax tax, we have spent nothing more on it since we purchased it. I expect we’ll be using it for at least another 3 years.

38. Dave says:

When I bought my car I did this work up too
2002 Prius vs 2002 Accent
Prius cost ~\$20,000
Accent cost ~\$8,500
We’ll figure about \$3.00 for gas
after 7 years I have 77000 miles, so I’m hoping to keep it for about 12 to 15 years thats 150,000 miles.
Prius 150,000 / 50 = 3000 gallons X \$3.00 = \$9000 in gas + \$20,000 = \$29,000
Accent 150,000 / 35 = 4286 gallons X \$3.00 = \$12,858 + \$ 8,500 = \$21,358
So 450,000 miles is the break point for fuel, not counting maintanice, taxes, insurance, trade-in.

Bottom line, it pays to do this work up, an informed buy is a smart buy

Maybe it’s time for Trent to address the seeming majority opinion that he made a bad decision with his Prius buy. Or is he so sure of himself, so impervious to criticism, that this seeming majority opinion about the foolishness of his Prius purchase can be dismissed? (loan aside… the actual purchase of a new car seems the foolish thing to me)

40. bob jase says:

What kind of washing machine lasts 15 years?! you’ll be super lucky to get 10 years out of a machine and 5-7 is more likely.

Remember that in TCO, realistic expectations are the MOST important factor (e.g. over a 1,000 year lifespan, the \$600 machine will save you over \$10,000, but that doesn’t matter). Even in a 15 year term, the \$300 machine had a lower TCO.

Get the \$300 machine.

41. conny says:

concord with the net value to compare today’s value of a purchase. It saves a lot of money in the end. And a lot of savings just vanish in to actual debt by paying now.

42. Suzanne says:

We bought a Kenmore front loader a few years ago and love it! One thing you didn’t factor in is the savings in wear and tear on your clothes from tumbling vs. agitating. We bought very efficient appliances for our whole new house and enjoy an electric bill of \$60 year-round.

43. Johanna, do you ever write a comment that is just positive? lol I don’t always read the comments here on TSD, but it seems like you always find something to criticize no matter what the topic.

On topic, I do think that sometimes it’s better to pay more upfront. I just posted last week about some very nice(but more expensive) baking sheets that I bought. They cost almost twice as much as cheaper pans, but they are so sturdy, I don’t think I’ll ever have to buy another pan. In the long run, they will save me money.

44. Dave says:

The way I read the post, the washer(s) have to work for 15 years minimum in order to come out ahead.

What washers built today will last 15 years? Maybe we are hard on ours (3 kids) but ours only seem to last 7-9 years.

45. Johanna says:

@Kristen: Yes, I do. But you won’t see me posting comments of the nature “OMG dis post is teh awesomez!” because I don’t feel the need to comment unless I have something to add to the discussion. Maybe also because I’m not here to shill for a blog of my own. Who knows?

46. lurker carl says:

Geez. Using Dave’s calculation, my 1988 Suburban was cheaper than Trent’s Prius. I paid \$2000 for it about 10 years ago and it had 32K miles on it. Estate auctions are great places to find low mileage, well maintained older vehicles for bargain basement prices. I’ve driven it over 220K miles since then averaging 17 mpg for all those miles while doing chores that would have destroyed the Prius. No major repairs, just routine maintenance and replacing wear out items like brakes, tires, belts and hoses. Even the AC still works!

Suburban 150,000/17 = 8823.5 gal x \$3 = \$26,470 + \$2000 = \$28,470

47. Anna says:

Similar theme, different situation. (Age disclosure here.) When I opted to start receiving Social Security earlier rather than later, even though starting later would get me more per month, I did so because the agent ran the numbers for me and concluded that if I started later, I would break even sometime after the age of 90. That decided it for me.

48. Rich says:

I assume the \$600.00 washing machine is a front loading type and the \$300.00 machine is a traditional top loading type. If that is the case, your home made laundry soap may need to be reformulated. My front load machine, while saving me money on electricity, requires low foaming laundry soap. Which, of course, costs more. It also starts to smell of mildew after a few days of not using it.

I’d but the \$300.00 machine. Even if it is less reliable, the most I’ve ever spent on parts is \$60.00. They are very easy to fix.

49. Sandy says:

If you hang up your laundry to dry…the amount you save on electricity will go up by \$10-15 per month automatically. I hang up 5-6 loads per week (inside on my rack and basement clothesline)and that’s a certain \$150-\$200 per year. Perhaps an article on that? Seems better than less than \$2 per month.

50. Kevin says:

Let’s be honest here, folks. The overwhelming negative response to Trent’s Prius purchase can only mean 1 of 2 things. Either Trent did in fact let “shiny bauble syndrome” cloud his judgement, and he made a hypocritical purchase, costing him credibility, or his decision actually made sense, but he’s simply done a poor job of explaining it.

Neither possibility bodes well for someone with aspirations of being a professional writer.

51. Bigger picture, I think SteveJ was on to something with Trent and his guiding principles outside of the simple money math. In economics we call them social costs, in personal finance we call them exigent to the analysis. The Prius purchase AND this washing machine purchase were both expensive deals on a strict private cost analysis (private costs meaning just the dollars and cents paid by Trent over time). If the social costs (environmental considerations, etc.) were added into the equation, both the Prius and the washing machine were great bargains. I, like Trent, will spend more for something that I believe is a better value in light of the social costs above the simple money calcs. If everyone only took into account their private costs, no one would ever had purchased a Prius, no one would ever had purchased an energy efficient washing machine, there sure as hell wouldn’t be a solar panel on a single rooftop, and they’d be justified because it IS more expensive in the short and long-run when looking purely at out-of-pocket. BTW, advances in technology are often made using social cost justifications so don’t be too critical of decisions like these. I know I love my CFLs, don’t you?

52. reulte says:

Johanna (comment 13) … “What I am saying is that you cannot generalize, because “it’s always better to lower your monthly expenses” and “it’s always better to keep more cash on hand” can’t both be true” …. But generalizations often seem contradictory – it is the specifics which are important.
It is always better to lower your monthly expenses IF you are in a stable situation (own home, steady job w/ insurance) but …
is is always better to keep more cash on hand IF you your situation is not steady (no insurance and yet you may need medical attention soon). Use your own specifics to tailor general rules to your life. Too many cooks spoil the broth, yet many hands make light work. Contradictory yet correct opposite. (#38) Besides, I like your input; sometimes critical, always thoughtful.

Joey (#10) – I don’t see Trent as rationalizing his choices — he is not accountable to us for his spending, rather I see him explaining why he did something in particular. I find your words too harsh for the situation. The fact that the Prius purchase continues to bring up dialogue indicts that there is a wide diversity of opinion on it.

k2000k (#20) .. “cloths with stains cannot be re-worn”. Uh, maybe I’m missing something — but clothes with stains certainly can be reworn. Children don’t care, anyone who has been a parent certainly understands, and most people don’t even notice. Stains can be covered with bibs, sweaters, jackets, or more permanently by sew-on patches, needlework, sparkly trim, sewn-on ‘superhero’ home-made patches.

Adrian (#34) Why do you think its a majority opinion that Trent erred in purchasing the Prius? I suspect that the majority who do agree with Trent don’t bother bringing up the matter. I don’t.

I disagree with this decision and agree with Over the Cubicle Wall (#26) and say — obtain the washer free or used (freecycle, appliance repair shops, friends who are upgrading).

53. teaspoon says:

Maybe Trent just really likes the Prius! I didn’t see any of this type of criticism when J.D. over at Get Rich Slowly bought his Mini Cooper, even though I’m sure he could have gotten a “better” (i.e. more reliable, better gas mileage, safer, etc.) car for less money than he spent. It’s OK to treat yourself, even here in frugal-land. Give Trent a break.

54. Dave says:

I didn’t say what one I bought.

>>>Maybe Trent just really likes the Prius! I didn’t see any of this type of criticism when J.D. over at Get Rich Slowly bought his Mini Cooper, even though I’m sure he could have gotten a “better” (i.e. more reliable, better gas mileage, safer, etc.) car for less money than he spent. It’s OK to treat yourself, even here in frugal-land. Give Trent a break.

But the point is that Trent is always rationalizing everything he does… and he tried to rationalize his Prius purchase and got himself into trouble with the rationalization (or at least the reaction to it).

@reulte – Just my impression, could be wrong. Maybe most people on here think buying a new Prius is a good decision.

56. Dottie says:

I just purchased a brand new 2009 Ford Expedition for \$39,000 cash. It gets about 16 miles to the gallon( I hope). I drive 68 miles round trip to work each day and would probably die if I had to ride in a small vehicle each day. I am very very very proud of myself when it comes to the decision I made to purchase this vehicle. 10 years ago I would have financed the entire amount for 5 years with out a thought, however I planned for almost three years, worked my butt off to save and made a very informed decision to purchase a vehicle that is a good fit for me and my family.
So who made the better financial choice.
Trent: less purchase price,much better fuel economy, car that fits his families needs,green, and financed -or-
Myself: Gas guzzler the size of a house in a third world county paid for with cash.
Sometimes it’s just real people making real financial decisions that are more educated and planned out than decisions they could have made years ago…Not just the lowest bottom line, lowest lifetime cost, lowest whatever. Way to go Trent.

57. Eric Mesa says:

I suspect most of the prius hate has to do with people hating prius drivers. Maybe they feel bad they are essentially being told by the prius drivers that they are killing the world? I don’t know.

I know when I went to buy a car in 2007 that even with nearly \$4/gal gasoline that a hybrid wouldn’t break even for me in enough time. Additionally, the repairs would probably have to be done at the dealer which would cost me more. My car still qualifies for super-low emissions and it gets 30-something MPG so it’s good enough for me.

58. Michael says:

Johanna #38, haha. I like Johanna’s comments a lot even though we disagree at least half the time. Goooooooooo children!

59. Kevin says:

@teaspoon (#45): ” I didn’t see any of this type of criticism when J.D. over at Get Rich Slowly bought his Mini Cooper”

That’s not fair AT ALL. JD bought his car the “right” way. He built a savings plan into his budget and had been saving up for it literally for years. When he finally had enough, he bought it USED, and paid CASH for it. He never contradicted any of the principles he’s been preaching.

Trent, on the other hand, went out and impulsively FINANCED a BRAND-NEW car, directly contradicting several tidbits of advice he’s given in multiple blog posts about the “right” way to do things.

60. Kevin says:

@dottie (#48): “I just purchased a brand new 2009 Ford Expedition for \$39,000 cash. I drive 68 miles round trip to work each day. I am very very very proud of [my decision] to purchase this vehicle.”

Yes, of course, when your commute is so long, it makes perfect sense to buy an enormous gas-guzzler. And why buy used when for just 30% more money you can get the exact same thing off a showroom floor?

Has this whole blog gone mad? Am I the only one who sees the insanity? I feel like I’m taking crazy pills![/Zoolander]

61. Kyle says:

I think the numbers and assumptions were cooked just a smidge in the long-term purchases favor. That’s okay, it’s natural when trying to make a point.

But I suspect a thorough, scientific examination of the total cost of owernships here would probably be pretty close to a wash.

62. Fred says:

For cars that depreciate slowly (any small Toyota or Honda, or cars like the Mini Cooper), it rarely makes sense to buy used. The only exception being if you don’t drive much per year.

I put on 25-30k per year. I did spreadsheet after spreadsheet analyzing annual operating costs for a new Civic vs. used, and under no circumstances was a used Civic significantly cheaper than new.

Buying new, you are assured the car hasn’t been abused or wrecked, and don’t have to worry about the past maintenance.

63. Joe says:

You forgot about the time value of money. If you bought the cheaper machine, you would be able to invest the difference (\$300) and earn interest on that money. Or invest it in some other way that could save money (better washing machine, better car etc.) This reduces that monthly cost saving from a 1.58 down a bit. 300 dollars would earn about 37 cents in interest per month at 1.5 percent compounded monthly. That is if you spent th interest every month instead of letting it compound.

64. Bill in Houston says:

To PJA (Comment #16), did you calculate the cost of electricity into your recharges? I don’t see that listed.

Now that we’re homeowners and are responsible for everything we’re trying to pay for everything upfront. We paid for painting, new light fixtures and ceiling fans, and a new furnace up front. I’m saving for a new roof right now (end of July for a \$6000 roof). It isn’t leaking now, but we had a lot of damage from Hurricane Ike last year. I know it needs doing.

65. Georgia says:

Trent is in a position that many of us wish we were in. He can figure out what is best for him and his family and has the ability to carry it out. Either way, expensive new car or used, paying in cash or paying some on time, he had the freedom to do this with his finances. I have always felt this was the object of this whole blog deal – to help all of us to get into that position. The fact that he liked the Prius better than another car has nothing to do with it. He is financially stable and can do it.

Anna – I did not take SS until 3 months before my 65th bd. The agent talked me into the early by saying that it would take me 6 years to make up those three checks. I took it early. However, when I went home & figured it out, she was right. Then I immediately turned it around and figured it from my perspective. I always tease that I am going to live to 123. But, to be sensile, I toned it down to 100, as that is an often reached age now. I ended up losing \$5000 over my lifetime left. Whew!! I could use that.
Whatever I do in life, I always figure for the long haul. If I won the huge Powerball I would take it in annual payments. I might not live to get all of it, but I would have paid less taxes and what would I care about the money after death?

In 1967 we bought a brand new Ford pickup – cost \$\$2100 with \$300 trade in. Because of our work it took us 7 years to pay off. Had a lovely banker. But it cost us nothing but tires over a 20 year period and my husband was a farmer who drove it hard, over hills, dales, ditches, etc. with heavy loads. Finally keeled over when the cab started swinging around a corner. The posts had rusted through. Money well spent, in spite of the interest.

Thanks for your helpful blog Trent. I have learned a lot and do have an EF of at least 4-5 months, enough to buy a used car and pay cash if I need another one. The one I drive now is a 2000 Ford Taurus Wagon and only has 167k miles on it.

66. Ronald says:

I learned this lesson the hard way recently.

My AC stopped working recently on a Saturday, and so I checked everything I could. Reset circuit breakers, reset thermostat, checked unit for any obvious damage, nothing seemed wrong. Called service guy to come out and take a look. He checked everything out, put a multimeter on to find that the thermostat wasn’t triggering. We replaced my cheapo batteries with a well-known alkaline and everything worked just fine. The thing is, my thermostat has a low battery indicator to tell when to replace the batteries, only it didn’t tell me.

I got off cheap, but not free. The final cost of the “Cheapo” batteries:
\$50 service call
5.50 well-known alkaline
3.50 for cheapo battery
====
\$59.00

I bought the “cheapos” because they were 2 dollars less than the well-known brand. I’ll never do that again!

67. tentaculistic says:

I’m going to be up-front and honest here. I’m someone who has to actually sit down with an Excel spreadsheet, agonize through the mathematical formulae, and input a lot of numbers before I get stuff. I didn’t do all that for the monumental Prius Debate, so I don’t really get all the hoopla. Frankly, I don’t really care that much, so I’m in the “please don’t mention the damn Prius again” group on these comment boards :)

I’m just here for the regular influx of what I consider to be a positive message, to counteract the negative financial messages I hear all day from t.v. and radio. I find TSD to be very helpful for that.

Oh yeah – up front spending (that WAS the point of this post, right? Not Priuses – I mean Prii). I’ve learned the hard way that clothes definitely fit into that category, especially if you are an urban professional or do any specialized activity (North Face fleece jackets are, it turns out, worth the investment. Who knew they weren’t just status symbols?). Now I try to buy high-quality clothes from discounters like Syms, rather than cheap clothes at full price from someplace like Old Navy. Lesson learned the hard way.

68. Bill in NC says:

Still, you can’t ignore the time value of money.

That makes it unlikely operating costs will ever pay for option B, when B costs double that of option A.

BTW, nearly 90% of the running cost of a washer is heating the water, so use cold water only.

And front-loaders are much more expensive to repair than top-loaders (electronic control board vs. mechanical controls).

So you want to think hard about an extended warranty for the former (out of warranty, it could easily cost \$300 installed for a new motor control board for a \$600 front-loader)

69. Eli says:

This logic is completely wrong and you can easily prove it. It entirely neglects the opportunity cost of your \$300 and that should absolutely be included in the “total cost of ownership”

I posted a comment yesterday that is still “awaiting moderation” I’m not sure if that’s because of its length or because of its contradictory argument. But, here it is shorter, and maybe nicer.

Run a spreadsheet with columns for the \$600 Dryer, \$300 Dryer, and the \$300 you won’t spend if you go with Dryer 1. String the costs out over 15 years. The \$600 one costs you \$20 a year and the \$300 costs \$40 a year. Then, we’ll say you invest the \$300 you never spend if you went cheap and give that 8% returns (over 15 years I think that’s fair). The cost of the expensive dryer will always be more than the cost of the cheap one plus your savings and invested balance, ALWAYS. Even if water and electricity quadruple the operating costs you’re still better off to go cheaper and invest. Try it.

I have had several good chats with appliance repair folks … there are NO highly reliable machines that they can recommend at prices points that I can afford. But they do recommend buying tried-and-true technology that is basic and simple to repair.

Like many, I bought a front-load machine for the environment and longer-term savings. 6 months out of warranty, our “processor” died and it cost \$450 for parts. 6 months later, the machine developed a very healthy vibration – “bearings” we were told and the repair would involve two service techs tearing it completely down to replace them. We decided the bill would be too much so we just ran it as long as we could (another 18 months) until it became unbearable. Against my better judgement, we bought a top loading high efficiency machine this time. About 8 months in, another electronic repair but at least it was under warranty. Thus far, \$2500 spent (2 machines and 1 out of pocket repair) after 6 years of ownership. Vs. \$450 for cheap basic top-load machine…. Extra \$2000 that will never be paid back except as life experience!

My recommendation: Moving parts + vibration + heat combined with fancy electronic processing boards do not mix. Consumer Reports likely does not evaluate the failure data that the manufacturers have when they make their recommendations. Save your money and buy a machine that you can fix yourself with over the counter parts if it breaks.

71. AGMycroft says:

This analysis (and, for that matter, the endless Prius debate) also ignores a key point in favor of economizing: the “real option value” of buying the cheaper alternative.

What happens if, five years from now, a new washing-machine technology shows up that uses only half as much water and electricity to make your clothes minty-fresh? If you bought the cheap machine, you chuck it and upgrade. If you bought the expensive one, you either grimace and upgrade (writing off, oh, about \$200 more than the person who bought the cheap washer) or grimace even more and tough it out for a while longer with the old technology.

I should point out that auto technology changes faster than washer technology. Computer tech changes faster still.

72. Katie says:

People, Trent doesn’t have to justify his car purchase any more to you! It’s his car not yours!

Stop lurking on here and go send out some resumes. Or go shopping and get the economy out of the tubes. Seriously. I have a career all lined up – if I didn’t, I wouldn’t be commenting. I’d be absorbing as much information as possible and I’d refrain from wasting energy commenting that could be harnessed for my job hunt.

73. reulte says:

Keven (#50) I don’t think the Pr**s was IMPULSIVELY financed, nor IMPULSIVELY chosen as new.

Arian (#47) I think most people have made their peace with the whole thing; whether they think Trent made a wise decision or not they can accept it.

74. Trent says:

I saved for years to buy a car because I knew we would need to replace my wife’s car eventually. As I’ve said tons of times (in the article and in subsequent comments), we could have easily cut a check for the car. We chose not to because of the opportunity costs – putting all that cash into the car up front means you don’t have that cash to take advantage of other opportunities

Because I made that choice, for example, I can do things like go to estate sales and, if the right deal comes up, cut a check for it. I’ve put in a lowball offer on the abandoned lot next to our home that would more than double the square footage of our lawn – if the person goes for it, the land addition to our existing property will increase our assessed property value by more than the offer, let alone the resale value. And that’s just in the first month.

The choice was very deliberate. The only people who think otherwise are people who didn’t read the original article or people who are out there solely to elicit reactions.

75. Johanna, as a blogger, while I’m not fond of misspellings and text speak, I certainly appreciate complimentary comments, even if they don’t “add to the discussion”.

A little encouragement goes a long ways. :)

76. PJA says:

@Bill in Houston

Yes although I don’t have the source numbers handy. Additionally, I was very conservative in the estimate for each years savings from not having to purchase new batteries. The annual savings estimate is about half of what I think it will be (based on a month of a fairly typical month for us) and that is still a tax free annual return of 18%.

http://www.grinningplanet.com/2004/11-23/rechargeable-batteries-battery-charger-article.htm

77. Stephen says:

Trent #60 “putting all that cash into the car up front means you don’t have that cash to take advantage of other opportunities”

You borrowed money for a car, so that you would have funds to invest when opportunities come along. You can’t have it both ways – you either didn’t have enough money for the car or you didn’t have enough money for the investment.

Sometimes investments go bad or your needs for the car will change (your wife gets a job closer to home) either way you have added an element of unecessary risk/stress in your life.

You’ve taken the “simple” out of the simple dollar.

78. Stan says:

Something similar happens in my industry, ink and laser printers. My saying is ‘The cheaper the machine the higher the cost per page.’ High cost per page is ok if your volume is low, but look at the cartridge cost and yield.

79. This is good stuff Trent… there’s a mentality, an intentionality here that more people need to consider.

Paraphrasing Zig Ziglar – would you rather spend a little more today or realize later that you spent less than you should have?

With the cheaper machine where would have been a bug in your ear – almost imperceivable at times – asking when the machine would break… that doesn’t exist with the other machine. That’s another cost – incalculatable as it may be – that is also associated with the cheaper solution.

Good stuff!
Dave

80. paul says:

When buying a washing machine always go for the most energy efficient & the most reliable even though it may be more expensive.