How do you calculate cost per use?

Add up what owning costs for a year, then divide by how many times you use it that year. The yearly cost has four parts: the value it loses (price minus resale, spread over the years you keep it), what it costs to own whether you use it or not, anything you pay each time you use it, and the growth the money could have earned if you had invested it instead.

When is it cheaper to own than to rent?

When you use it often enough that your cost per use falls below the rental price. That number of uses a year is the break-even. Below it, renting is cheaper. Above it, owning is. The break-even is the fixed yearly cost of owning divided by the difference between the rental price and what each use costs you as an owner.

Why include lost investment growth in cost per use?

Because money spent on a thing can't also be invested. If that money could have earned a return, the return you give up is a real cost of owning, even though it never appears on a receipt. Leaving it out makes owning look cheaper than it is, and makes the break-even look lower.

Work & Life

What it really costs each time you use it

Ethan went to the dealership for a sedan, and now he’s sitting in an SUV with heated seats and a roof rack, thinking about his two ski trips a year. Cost per use is a good instinct for a moment like that: what you paid, divided by how many times you use it. The usual version leaves out most of the cost, though. Counted properly, it answers a sharper question. How many times a year do you have to use something before owning it beats renting it?

Four costs, not one

For each year you own something, four things add up. The value it loses: what you paid, less what you’ll sell it for, spread over the years you keep it. What it costs to own whether you use it or not, like insurance, storage, maintenance and registration. Anything you pay each time you use it, like fuel or supplies. And the easy one to forget: the money tied up in it isn’t invested. If it could have earned a return, that lost growth is a real cost, even though it never shows up on a receipt.

Add those up for a year and divide by how often you really use it. That’s your cost per use. Compare it with what renting costs each time and you have your answer.

A worked example

Ethan needs a car either way, so the question is whether to pay more for the SUV instead of the sedan because of those two ski trips. Since he’d buy a car anyway, only the differences count. The SUV costs $9,000 more and should sell for $3,500 more after 6 years. It costs $1,200 a year more to own (insurance, tires, worse fuel economy on the daily drive). A rental SUV runs $350 a trip, all in. The money could otherwise earn 7% a year. The Cost Per Use calculator returns:

Yearly cost of the upgrade: $2,599, which is $917 in value lost, $482 in lost growth and the $1,200 in yearly costs
Cost per trip, owning: $1,299
Cost per trip, renting: $350, or $700 a year for two trips
Over 6 years: renting saves $11,393, and the $9,000 stays invested
Break-even: the upgrade pays off from about 7.4 trips a year

Price your own purchase →Free Cost Per Use calculator, no sign-up. Enter the price, resale, upkeep and how often you’d really use it.

How often decides it

Everything else in the example is fixed by the purchase. The number of uses is the one input that moves the answer most, so here it is moving. At 1 trip a year, the upgrade costs $2,599 a trip. At 4 trips it’s $650 a trip, and renting still saves $7,193 over the 6 years. At 7 trips it’s $371, and renting is ahead by only $893. At 8 trips it flips: $325 a trip, and the upgrade saves $1,207. At 10 trips it’s $260 a trip, and the upgrade saves $5,407.

So when Ethan asks whether the SUV is worth it, the answer is a question back: how many times will he really go? It’s the easiest number to overestimate. If you’ve ever bought a season pass in September and used it three times, you know the trips you plan and the trips you take aren’t the same number, so enter what you did last year, not what you hope to do next year.

Three things that move the break-even

Lost growth. Set the return to 0%, as if the money would just sit in a drawer, and the upgrade looks cheaper: $1,058 a trip, with a break-even of 6 trips a year. Counting what the money could have earned adds $482 a year and pushes the break-even up to 7.4.

Costs you pay every time. If the SUV burns an extra $40 of gas on each mountain trip, it’s $1,339 a trip, and the break-even climbs to 8.4 trips a year.

The rental price. It moves the line more than you’d expect. If you can rent for $250, the break-even is 10.4 trips a year. If rentals near you cost $500 on a busy weekend, it drops to 5.2. Price the actual rental, for the actual weekend you’d go, before deciding.

It isn’t an argument against buying

The same math often says buy. Take a $900 espresso machine worth about $100 after 6 years, with $60 a year in upkeep and $0.60 of beans and milk per cup, against a $4.50 café latte. At two a day, 730 cups a year, the machine costs $0.92 a cup, and owning saves $15,673 over 6 years. The break-even is about 60.2 cups a year. At 100 cups a year owning still wins, at $2.95 a cup. At 40 cups a year it doesn’t: $6.47 a cup, and the café comes out $473 ahead, while the machine becomes a very shiny place to keep the mail.

Use something often and owning wins. Use it rarely and renting wins. The calculator shows where that line falls for your numbers.

What the math leaves out

This compares cost only. It leaves out convenience, which can be worth paying for: rental SUVs sell out on the first big snow weekend, and a car already in your driveway lets you go on short notice. It assumes you pay up front, so a loan would add interest and make owning cost more. Resale is a guess, so try a lower one and see if the answer holds. And owning can change how often you use something. That’s fine, as long as the number you enter is the one you’ll really reach. If I were Ethan, I’d buy the sedan, rent the SUV for those two weekends, and put some of the difference toward lift tickets.

The numbers above come from the sample scenario in TheSharpDollar’s Cost Per Use calculator (“Try an example”), plus the espresso machine entered as a whole purchase. Run it with your own purchase.