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Owning nothing is now a luxury, thanks to a number of subscription startups

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Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#81

Post by apatters »

JMTQp8lwXL wrote: post #69
apatters wrote: post #58

Earlier quoted context omitted.

Renting things is a financial tool and it can save you money. The calculation is simple. You estimate the difference between how much something costs and how much you can sell it for once you're done using it. That's your real cost to own it. Compare that number to the cost of renting it for the same time period. If the cost to rent is lower, renting is a better deal. For larger and more involved transactions (especi…

In an efficient market, shouldn't the cost to own and cost to rent be roughly the same? Otherwise, everyone would rush to the clearly cheaper option.

A rational/efficient example of where renting might be a better deal for you is if you don't have access to wholesale prices and someone else does. They buy at a discount and then they rent out to you at a price which makes it cheaper for you than buying at retail.

A classic scenario is renting a movie. Let's use DVDs as an example--even though they're falling out of favor, they're a little simpler to talk about, and the economics of online aren't that much different.

Studios like big numbers and would like to sell movie media/rights/access/whatever (it's complicated) to someone who can drive lots of demand. So the rental outlet will get a steep discount on those things for buying in bulk.

Meanwhile, you're not even sure if you'll want to watch that movie more than once, and the resale value of a used DVD after a couple years is basically zero. So renting the DVD at least the first time, and maybe every time you want to watch it, is a pretty good deal.

Case in point, Redbox's "markup" over whatever they're paying the studios is large, but it's still a pretty good deal for you and me.

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#82

Post by jaabe »

chrisco255 wrote: post #26

Renting an apartment vs owning a house is not necessarily a bad financial move. Depends on a number of factors. For instance, if you anticipate moving within a certain time frame, between closing costs, mortgage fees, commission, etc...it can cost more to own in the first 3-5 years, especially if prices are stagnant. Also, there are hidden costs of home ownership not necessarily factored in for, like repairs, mainten…

In Denmark where I live you can loan 1 million Danish kroner at around 5k each month. A decent downtown apartment in a bigger city or a house in the suburbs is 2-4 million. Renting the equivalent is 10-15k, and with renting you obviously skip a lot of the maintenance cost and taxes. On the flip side loans are tax-deductible, meaning you actually don’t pay 20k to borrow 4 million, you pay 12k.

It can still be cheaper to rent, at least if you look at the small scale. Because in 30 years, those 4 million will be yours while people who rent will still have nothing. It’s also risky, because maybe those 4 million will really be 1 million.

Over all, owning real estate in a safe location is always going to be much better than renting. At least in Denmark. Hell, if you can manage to buy around 15-30 lower-cost apartments in a university city and rent them out, you’ll be able to pay your loans and have enough spare in passive income that you never have to work again.

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#83

Post by osdiab »

rietta wrote: post #35

Its hard to wrap my head around renting furniture and cloths. Most of the pieces in my house are gifts from family, many are antiques and very functional. Getting married and buying a house was all the excuse our families needed to set us up. I know not everyone has this but many do. Saved a ton of money vs buying new or renting.

I don’t rent furniture but I see the appeal - I myself am not in a stable living situation (nor do I want one at the moment), I like living in different places and don’t want to deal with moving, reselling or disposing furniture every time I make a move.

Some people’s solution to that is renting everything, mine is just to live lean (small place, minimal furniture, just for sleeping and simple cooking really).

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#84

Post by JMTQp8lwXL »

fromthestart wrote: post #73
JMTQp8lwXL wrote: post #69

Earlier quoted context omitted.

In an efficient market, shouldn't the cost to own and cost to rent be roughly the same? Otherwise, everyone would rush to the clearly cheaper option.

No, because of the time value of money. Money now is worth more than money later. Having all of your toys today vs saving for a couple years to buy a home. [1] has a somewhat explanation but the same conclusion. 1. https://www.investopedia.com/terms/t/timevalueofmoney.asp

If I rent everything, and put my short-terms savings from renting (as opposed to buying) in the S&P 500, would I end up with more wealth in the long term, when compared to buying outright?

If the subscription economy has the effect of being a low-interest loan on anything, it's not a bad deal. One would be unwise to turn down a 0% car loan-- save your money, and grow it, instead of paying up front for the entire car. Same idea, but applied to the subscription economy.

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#85

Post by apatters »

baroffoos wrote: post #71
JMTQp8lwXL wrote: post #68

Earlier quoted context omitted.

I'm still not convinced this is good for companies. They think everyone will stick around and keeping paying, unwavering loyalty month-after-month, when in reality, many people cancelled their HBO subscription after Game of Thrones was over. It doesn't really solve the volatility problem for business income. When the next downturn hits, guess what will be the first thing to go? Frivolous subscriptions.

Maybe this is why they are moving to subscription furniture. You may be quick to cut your movie subscription but not your bed or fridge subscription.

Subscription furniture has actually been around for decades. The market is mostly corporate. It's useful for relocation packages or something and the customers aren't very price sensitive. For example: https://www.cort.com/

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#86

Post by dheera »

JMTQp8lwXL wrote: post #68
lscharen wrote: post #20

“It is quite likely that, when you lived in America, you leased everything. You never owned anything, but someone else did and you had to pay for every single thing you used. That's another form of resource ownership that concentrates wealth.” — Manna, Chapter 5 — https://marshallbrain.com/manna1.htm

I'm still not convinced this is good for companies. They think everyone will stick around and keeping paying, unwavering loyalty month-after-month, when in reality, many people cancelled their HBO subscription after Game of Thrones was over. It doesn't really solve the volatility problem for business income. When the next downturn hits, guess what will be the first thing to go? Frivolous subscriptions.

Not all subscriptions are frivolous. I use a car subscription for example. As a startup founder I can't afford a car, still want access to one for hiking trips, and my entire monthly subscription fee including insurance is cheaper than renting twice a month from Enterprise and cheaper than renting for 3 days from Zipcar. (Also I don't believe in a long term future of car ownership -- I think one day it will be unnecessary -- just not yet.)

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#87

Post by posbehsf »

lscharen wrote: post #20

“It is quite likely that, when you lived in America, you leased everything. You never owned anything, but someone else did and you had to pay for every single thing you used. That's another form of resource ownership that concentrates wealth.” — Manna, Chapter 5 — https://marshallbrain.com/manna1.htm

It’s not that simple. I choose to rent even though I have the savings to buy a house because I prefer putting my money in more liquid assets like stocks. People can choose to lease certain categories of assets and “own” others (e.g. public stock).

There are tons of hidden costs with ownership like insurance, property taxes, HOA, repairs/maintenance I don’t have to deal with. Plus the opportunity cost of locking $200k+ in an illiquid asset with high transaction fees to eventually liquidate years later isn’t appealing unless you’re buying a home firstly as a permanent home for raising a family and not as an investment.

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#88

Post by sokoloff »

JMTQp8lwXL wrote: post #84
fromthestart wrote: post #73

Earlier quoted context omitted.

No, because of the time value of money. Money now is worth more than money later. Having all of your toys today vs saving for a couple years to buy a home. [1] has a somewhat explanation but the same conclusion. 1. https://www.investopedia.com/terms/t/timevalueofmoney.asp

If I rent everything, and put my short-terms savings from renting (as opposed to buying) in the S&P 500, would I end up with more wealth in the long term, when compared to buying outright? If the subscription economy has the effect of being a low-interest loan on anything, it's not a bad deal. One would be unwise to turn down a 0% car loan-- save your money, and grow it, instead of paying up front for the entire car.…

Side note: There's a financing-related cost to a 0% car loan. It's whatever the surplus on the insurance that you're required to carry (because you have a loan) over what the true value of that insurance is to you.

I have a 0% loan right now on my LEAF. I'm likely to pay off that loan pretty soon as the value of that insurance (to me) is decreasing as the car ages, but I can't dump it unless the loan is paid off.

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#89

Post by JMTQp8lwXL »

dheera wrote: post #86
JMTQp8lwXL wrote: post #68

Earlier quoted context omitted.

I'm still not convinced this is good for companies. They think everyone will stick around and keeping paying, unwavering loyalty month-after-month, when in reality, many people cancelled their HBO subscription after Game of Thrones was over. It doesn't really solve the volatility problem for business income. When the next downturn hits, guess what will be the first thing to go? Frivolous subscriptions.

Not all subscriptions are frivolous. I use a car subscription for example. As a startup founder I can't afford a car, still want access to one for hiking trips, and my entire monthly subscription fee including insurance is cheaper than renting twice a month from Enterprise and cheaper than renting for 3 days from Zipcar. (Also I don't believe in a long term future of car ownership -- I think one day it will be unnece…

Not all subscriptions are frivolous, but some are less essential to fulfilling your everyday life than others. The company you're renting the car from is keenly aware the value of cars may diminish with time-- the risk is built into the cost.

Re: Owning nothing is now a luxury, thanks to a number of subscription startups

#90

Post by onion2k »

taneq wrote: post #65
onion2k wrote: post #60

Earlier quoted context omitted.

One small difference - eventually they pay the bank debt off and own the item. The as-a-service users pay forever.

A lot of people just keep their credit cards maxed, pay the minimum every month, and re-sell things they've bought at a loss.

Sure. Even then though, if they ever decide to stop living that way they can pay off their debt without borrowing more, and keep the stuff they bought.

re-sell things they've bought at a loss

Only a loss compared to the price at the start. If you account for the utility they got from the item and depreciation it's probably just the current market value.

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