Lifecycle costs and how you’re screwing yourself.

What is lifecycle cost you’re wondering? Well the Wikipedia definition of Whole-life cost refers to the total cost of ownership over the life of an asset.  So the life cycle cost or whole-life cost is the cost of acquisition, operations, maintenance, repair and disposal of the item. Heres a diagram to help explain this better

Now you’re wondering why is this fellow introducing another concept to the already confusing blog? We humans are very transactional. We live in the short term and make decisions basis that short timespan. Its kind of like giving a monkey a fruit. If its ripe and tasty, he’s going to eat it.  And so it is with us. We look at just the cost of acquisition (purchase price) and that’s it. So lets say you are in the market for a new ceiling fan (using this as an example because this is an issue I’ve been dealing with). What’s the approach most of us would take? Probably ask everyone around what’s a good brand to buy. Go to the hardware store. Ask him for different models in the brand you like. Look at something that looks pretty, check for which colour would hide the dirt and ask him for a discount. Back in the day you got fans with regulators included with them and maybe that’s what would influence your buying decision. There are the savvier amongst us who after taking all this info would check online to see if they can get a better deal on the price and if not buy from the local dealer.

But that’s the extent that most of us would go to. After all a fan is a fan, besides the look and pricing what difference does it make. This is exactly the state of mind of treating this as a transactional relationship. Let’s look at some hypothesis in this story.

  1. You rarely replace the fans in your home. Maybe once every 5 years or when the thing conks off.
  2. In Indian conditions your fan is likely the most used appliance in the home. Running in most cases upwards of 6 hours a day.

So lets run the numbers on this

A normal electric fan from orient: Orient Electric Apex-FX 1200mm Ceiling Fan (White): 1299 INR

A BEE 5 star rated fan from Crompton: HS Plus 48-inch 53-Watt Power Saver Ceiling Fan (Brown) : 2668 INR

A BLDC based fan from Atomberg: Gorilla Efficio Energy Saving 5 Star Rated 3 Blade Ceiling Fan With Remote Control and BLDC Motor, 1200mm- White 3200 35W  : 3200 INR

So lets run the numbers on annual consumption. 6 Hours operation 365 days a year

ModelPriceUnits consumed annual
KW
Electricity 5 Years
INR
Lifetime cost
INR
Orient Normal 75W1299 164 41065405
Orient BEE 5 Star 48W2668 105 2628 5296
Atomberg Efficio 35W3200 761916 5116

Those turned out to be some interesting numbers. Plus, the Atomberg does not need a new regulator. So you save on the cost of buying a new regulator, the cost of installation reduces and you don’t have the electricity cost of the regulator. So additional savings. Buying a cheap product does not necessarily mean you’re getting the best deal. Especially if its something you will use on a regular basis. work out how much it’s going to cost you to own maintain and operate ( lifecycle cost) and you might come up with a completely different picture.

Plus this is considering the fans are running at full blast. In the colder seasons when we reduce the speeds of the fans, the Atomberg for example can run on power of almost 3.5 watts. So those savings are even more ridiculous.

Granted. I’ve considered a slightly higher electricity cost of INR 5 unit. But electricity costs are only going to go up. Especially if you refer to the new rulings by the JEREC. And if your upgrading from ancient fans, the benefits you see are even higher.

And this is just the case for a ceiling fan. If you apply this principle to all the things in your life its mind-blowing the kind of blatant inefficiency we live with. Apply this to any long-term purchase that costs a regular operating expense’s, such as refrigerators, TVs, Mixer, Microwave oven. A simple best practice you can use is to buy BEE 5 star rated appliances for reducing your operating expenses.  But these principles are not limited to electrical appliances. You can use these in the purchase of financial products, cars, houses and finally to life itself. And more of us need to use this system; its better for the planet. How you ask? You use your resources more efficiently and that reduces this whole consumerist attitude we have in life.

Let me give you an example. Most of our electronics are built to be disposable/ non serviceable. Something breaks, replace it with a new one. The cost of building an entire new product, shipping it, getting it to you and then of disposing the old one are ridiculous. Lets not even get into the concept of planned obsolescence. So my friend’s laptop charger kicked the bucket. The cable got cut just beyond the point of the strain relief. Now if you take it in to Lenovo, they will tell you need to buy a new one and they don’t repair them It’s a sealed unit. I went online saw a video on disassembly of the charger. Came home opened it up. A little bit of cutting, soldering and taping stuff up the thing worked like a charm. My total investment in time was under an hour, and a deep gash in my hand (I’m clumsy). But let’s consider I had to go and show it to the service centre, buy a new one. The time energy and effort I would have to expend would be almost the same and maybe more. Plus, my friend would be out of pocket for a new device and we’d be adding a perfectly usable device to the junk pile. This attitude of consumerism needs to go.

Closing Thoughts

We need more devices built with the whole life cycle cost considered. We need devices built that are repairable and we need to learn how to repair them. The best way to do this so that companies take notice is to vote with your wallet. Buy devices that are fixable. And manufacturers will start making more of them. And when faced with an issue or something breaks try and fix it yourself. Take the first step and it soon becomes an easy path.

Yours truly

Poixe-kar

DISCLAIMER: (Your not going to be able to fix all things. Sometimes you can be dealing with Electricity or a mechanical system that can cause you serious harm. Please assess situations from case to case. And when your in over your head, use the services of an expert. Anything you do is at your own risk. Its not my money and not my life. So please be sensible.)

Do you think of thinks on a life cycle cost basis? Are you considering the impact of your decesions on you future? Hows your Journey to FI coming along? Share your ideas and experiences in the comments section below.

If you like what your reading leave a comment, subscribe and share it with your friends

Leave a Reply

Your email address will not be published.