Cost Per Use
The gist of it:
Cost per use is an effective model to alleviate the cognitive load of making purchasing decisions.
The value of an item is directly related to how much use you can get out of it. This helps you determine if spending more money would make sense.
How to use it:
Cost per use = Purchase price / number of uses.
If a new 13” MacBook Pro costs $1,780 and you use it 4 hours a day for 1 year. Then your cost per use (or in this, case cost per hour) is $1.22
The math works out to be $1,780 / (4 hrs x 365 days x 1 year) = $1.22
If you use it for 3 years, then the cost per use drops to $0.40
Cost per use drops the more uses you get out of it. So the decision to purchase lies with what an acceptable cost per use is for any item.
If the cost per use of an item is $1 or less, it might be easier to just buy it than spend any more time thinking about the decision.
The acceptable cost per use can be higher if there’s additional value gained when using the item.
For example, a high performance pair of sports shoes may cost more per use but have better cushioning, traction and lockdown to help you perform better or prevent injuries.
Deep Dive
Cost per use is the idea that the value of an item is directly related to how much use you get out of it. The more use you get from an item, the more you should expect to pay for it. The 'sweet spot' of a purchase, then, is the one that has the most uses for the cost.
Most of the products we buy - from everyday consumables like food, cleaning products, toiletries, clothing to bigger purchases like a new phone or laptop - are purchased with the idea that we’re going to be able to use them a number of times over a period of time.
In each case, a big part of the purchase decision comes from the idea of ‘Cost per use’ - Or how much do I have to pay for each use of this item before it is depleted or becomes unusable.
For items we consume, it’s a direct calculation - if I get 8 bowls of cereal for breakfast every day from a box of cereal which costs $7, then the cost per use is $0.87.
This helps to quantify certain decisions like buying a bigger box of cereal will typically yield a lower cost per use.
So bulk purchases are typically better if the frequency of consumption justifies it, lest it goes bad before you can finish consuming it.
The same thinking can apply to subscriptions like Spotify or Netflix - If you’re a heavy user, your cost per use (or hour of use) may turn out to be only $0.40 if you watch 40 hours every month.
With some other items, like a laptop or clothing, our use of it tends to be over a prolonged period of time and a key part determining cost per use is to consider the quality and timelessness of the item.
For example, fast fashion tends to be cheaper but has a higher cost per use (or cost per wear) due to the quality of the garment (which may fall apart after a few wears) or the limited number of wears caused by trend cycles. The same can be applied to electronics that are cheaper to buy but fall apart in a few months.
Well-made products may have a higher price tag but if you are able to use it frequently for a long period of time, the cost per use will always be lower.
In addition, to justify a garment’s environmental footprint, you should be able to wear it at least 30 times, if not much more.
As long as you can afford the initial price tag, prioritising cost per wear is the most logical and sustainable choice.
“Just because you can afford it doesn’t mean you should buy it.” - Suze Orman
Sources:
How Not To Waste Money: Use The Cost Per Use Formula
How to calculate "cost per use"
Cost per use: The concept that will save your checkbook
Cost Per Wear: What It Is & How It Makes Slow Fashion Cheaper
Cost Analysis Calculator
