Should you buy or rent a car? Actually, why buy anything?
Products will generate revenue across their entire lifespan and not just at the point of sale. Maximum profit will be realized in a manufacturing model with lower production, higher quality and less waste.
Every time I get the invoice for my Uber ride to work I wince a little. It’s not a lot — about R120 a day — but it adds up. Watching that cost tick away every day prompts me to think about buying a car but it just never makes sense.
According to the AA vehicle rates calculator — a useful guide to calculating how much it costs to run a car per kilometre and commonly used in expense claims or tax returns — a 1.3 litre, Toyota Corolla 2016 costs R6.34 per kilometre to run. This includes purchase price, depreciation, resale, insurance, maintenance and petrol costs. My last Uber ride cost me R8.58 per kilometre.
To use Uber to travel 20 kilometres per day, on average, for 2 years it will cost R125,268. According to AA rates, that distance will cost R92,564 if you buy the same vehicle and sell it afterwards.
Renting is more expensive. But it comes with the extra comfort of not needing to drive. Traffic means that I can sit back and read a book, reply to emails on my phone or prep for the morning meeting.
I spend only at the time of use, freeing up my capital to invest or spend on other opportunities. I carry less risk by not owning a car — in an accident I don’t need to argue with insurance companies to get a fair pay out and I don’t worry about not getting a fair value when I sell the vehicle.
The feasibility of renting depends on the individual’s situation and is less viable for people who travel longer distances or have less routine. But it’s an option we often forget to consider or properly calculate.
Leaning into the couch working through the comparison, I looked at everything I own. Does it make sense to own anything?
What if just like renting a ride, we rent everything — the couch, oven, TV, carpet, cutlery and curtains?
It sounds like an uncomfortable concept but looked at another way, I already do — I rent a fully furnished apartment. I pay a premium on my rent to use the appliances owned by someone else. I pay for damage or theft directly per instance or indirectly through insurance coverage.
If we break up that premium per item, there exists a market and an economic model where everything can be rented instead of bought. When you move you could, theoretically, rent everything on a contractual basis instead of transporting all you own or restocking the place with what you need. Once you’re done with it you return it to its owner (a renting agency), pay for any damage and move on. A secondary market would develop for used goods and the renting agency would be able to lease these at a lower price. As a lessee you’ll have the option of paying more to rent a new oven or less to rent a used one, for example.
The renting agency has an incentive to buy goods that last so that they are able to rent them out for longer periods of time with less conflict around malfunction and breakages. Manufacturers will adapt and increase the supply of durable products.
Products will generate revenue across their entire lifespan and not just at the point of sale. Maximum profit will be realized in a manufacturing model with lower production, higher quality and less waste.
From a consumer’s point of view, you will have higher flexibility and variety. Your house could be redecorated twice a year to adjust the colours or comfort for summer or winter: blue curtains and tiles for hot afternoons or deep reds and thick carpets for cold, cosy evenings. Your consumption could track your income — if you’re having a rough few months, send back your TV and deluxe coffee machine until you find your financial footing again.
Economic success based on perpetually increasing production cannot last as we’re constrained by resources. But that doesn’t mean we need to decrease individual consumption — we just need to be clever about how we do it.
A shorter version of this article was originally published in The Business Report
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