Depreciation may be caused by wear & tear or obsolescence caused by technology advancement. It is a hidden cost and it reduces the value of the item. In accounting, every purchased machine has its depreciation cost which is shown under expense. We know that the condition of the machine is getting worse and losing its value overtime. Unlike property or stock, their value might be increased over time and in some cases even earn money for you through rental or dividend respectively.
As our team from leasany.com aware from the observation in friends’ house or conversation with friends and colleagues, there is a bad behaviour of purchasing unnecessary items. People are getting used to buy the so-call necessary item which is useful for the moment when you going to use it, however, it is very often one-time use and was left untouched for years after the first use. Let’s start to think about and list down the items which are kept or stored in your house untouched for years or twice a year?
You may find the cleaning machine for bed and mattress, you may also find exercise equipment, how about travel items? Now you may notice that your travel items are lying down in your cupboard most of the time. Technology develops rapidly and obsolescence occurs every one or two years has become a normal scene, especially for electronic devices. For example, you own a GoPro5 for 590 SGD in 2017 and GoPro6 is released to the market one or two years later due to technology advancement. Would you trade in your existing GoPro5 for the new GoPro6 with lower price , or remain using your outdated GoPro5 and not updated the latest technology?
You may soon realize that you are actually buying item which losses its value faster than you may think of.. However, many of us are not willing to believe the truth. Let’s take the GoPro example above with slight twist. Imagine you are now owning a GoPro 4 that you have bought two years ago and you are going to sell it off so that you have extra cash to buy a GoPro 5 (assuming you only need one GoPro), which is currently the latest model in the market. From a market survey we have done, you can only sell it off with 350 SGD while you bought it at around 550 SGD when it was just released. There are a few questions for you to think about this moment:
1. High pricing of travel items
New advanced products are very expensive when it just releases.
2. Rapid Change in Technology
The rate of releasing new version or model of product is getting faster and faster due to the rapid development in technology. The functionality, portability and appearance are more advanced, attractive and useful. It is difficult for everyone to own all models of the products after the consideration of price and usage.
3. Low Usage and Its Purpose
Every equipment has its pros and cons, it might be suitable for single or group. There is not the best equipment in the world, but there is the most suitable one. For example, you need the backpacks in different sizes, it depends on the usage period and the purpose.
4. Storage issue
Bulky travel item occupies the house space.
5. Maintenance Issue
As an owner, you have to bear the risk of damage for the item. Sometimes the damage can be caused by deteriorating overtime due to lack of maintenance. You may want to take into consideration the cost of repair which can be up to hundreds sometimes!
6. Risk of Lending to Friends
Let’s be frank, It is quite awkward and difficult sometimes to lend an item to your friends. You may worry about whether the item will still be one piece or scratches after you rent it. Once damage on the item has been found, your friend might apologize and he/ she might compensate you for the repair in a better case but that is the last thing we want it to happen. You can’t really evaluate the damage and the current value of your item, and you are more concerned about your friendship.
7. Issue of Sharing
Who will be in charge of having the maintenance consistently? Who should pay more since the person in charge will keep the item most of the times? What is the solution/consequence if the item is damaged during the usage period of co-owner?
8. Lack of Understanding on Product
Beginners always spend much time on understanding the user manual. Without professional advice, beginners may miss out some critical points and have higher change of losing/damaging the product.
9. Low Trade-in Price
Depreciation on the value of the travel item is much faster that deterioration of the travel items. Continue with Gopro example, it is possible based on the market survey provided you are lucky enough to find a buyer who need an (second hand) action camera. As a results, the cost of owning the Gopro 4 for 2 years is 200 SGD.
10. Risk of Selling/Buying on Carousell
The owners are also facing the risk of selling because the item may not have demand unless the price is low enough. If the product is still under warranty, the seller may encounter some troubles if the buyer would like to claim the warranty. Not only that, the buyer also has the difficulty to check the actual condition of the product. You may not know what is in the original packages. The product may work when you inspect and test the item during the meetup but it has malfunction after few days.
The ten points above show you the reason why you should rent the item instead of owning it. In summary, renting an item is lower risk, fewer responsibilities and lower cost as compared to owning it instead. Let’s start your rental journey with Leasany.