10-01-11 - Used Prices

I really like the idea of buying used. Save some money, maybe prevent some goods from going to the land fill, fuck the retailer, etc. But used prices are just really fucking out of whack.

Used good need to have a *huge* discount. If you look at the utility, when I see something for sale on craigslist,

I can't just click "buy it" and it shows up at my door. So I need a big discount for that.

It's usually badly described and photographed, so I have to do a bunch of research. Discount.

I can't pay with CC at all so I have to go fetch some cash. Discount.

The seller has a 50% chance of being a flake in some way, like telling me its been sold after I show up for my appointment, or putting up the wrong item. Discount.

If it's broken or wrong or whatever, I can't return it. Big discount for this.

There's always an information gap problem when buying used - the seller knows more about the item than you. This fucks you with new items too, of course, but it's worth with used. eg. there's a chance that it's in worse condition than you know. Discount for this.

Even if some of the bad eventualities don't happen on a particular purchase, the price needs to be discounted by the probability that they happen times the cost to you when they do. eg. if your $100 purchase has a 10% chance of being fucked and worthless, you need a $10 discount on all purchases PLUS a discount for the trouble in that event, which is probably another $100 times 10%, so $20 total discount.

The result when you add up all the factors is that something that sells for $1000 new needs to be under $500 or so for it to be +EV to buy used. And it just isn't. In fact it's usually over $800. Used prices are uniformly too high.

Part of the problem is that the price of goods has gotten so out of whack with the price of labor.


billyzelsnack said...

I have a couple of expensive niche hobbies and I always try to buy used. 65% of retail is about right across my hobbies. Funny that 65% is also the around wholesale to retail percentage too.

I've found that buying/selling at 65% allows me to always have near top of the line stuff, over time, for zero out of pocket cost.

The trick is to try to hit the depreciation sweet spot. A place where you can own it for a given length of time for little to no depreciation. Of course you have to regularly buy and sell and have a trader mentality, but I mostly enjoy that aspect.

cbloom said...

If the time investment is not a cost to you (because you enjoy the hunt/negotiation/research/etc), that changes the whole calculation dramatically because then it doesn't count as hourly "work".

It's really the time costs that make it non-viable.

nothings said...

I think there's a continuum between favoring time and favoring money.

Most people I know have moved along the continuum over time, either as a function of aging or as a function of money-having (not sure which). Not everyone, but most.

So probably there just aren't enough used things out in the marketplace to drive the price down to the level that the favoring-time people want.

It shouldn't be surprising that people who are "poor" are more willing to invest the time to get a "deal" even if it's not a huge deal. Whether it's that strongly correlated I don't know.

But yeah, I just almost never buy used. I bought a car used but that was a no-hassle buy by design.

old rants