Save Money With a Refurbished GPS

The reason you are looking for a refurbished GPS is because you are in the market to save some of your hard earned money. You know that your dollars just don’t go as far as they used to and you don’t want the rising cos of gas, food, and housing to eat into your ability to buy an unnecessary gadget or two. By going the refurbished route you are choosing to forgo the comfort of buying a ‘new’ device and instead choosing the wiser, more cost effective route.

We have already gone into detail concerning why buying a refurbished GPS is good, but in that discussion we did not go into detail concerning the financial benefits. Here is an example of the financial impact a refurbished GPS can have over the lifetime of a twenty-five year old.

Before we get into it, let’s make a few basic assumptions for out thought experiment. Right now on Amazon.com there is a TomTom One Third Edition Vehicle Navigation GPS with a regular price of $195.95. The refurbished versions of TomTom One Third Edition Vehicle Navigation GPS (Refurbished) is also being sold on Amazon.com for $149.99 regularly. That represents a savings of 23.45%. This will be the baseline savings we will use to calculate all future GPS purchases.

Another assumption we will be making is that a new GPS unit will be bought every 3 years. The price of each new purchase will increase 3% to simulate inflation and to mimic the price of the same grade device purchased throughout the years. Though the cost of technology is decreasing in relative terms, the latest and greatest is usually accompanied by stable or increasing prices.

In the first year of purchase the individual saves $45.96 which they invest in their high yield savings account. For the sake of the experiment let us suppose this account returns 3.75% annually and the return of the account is taxed at 5%. Over the first year the value of the money saved is $47.60. After two years it is $49.29. And after three it is $51.05. The money has grown a total of $5.09 over the first buying cycle.

At the end of the third year a new refurbished GPS is bought at $163.90 (new price for a new device after inflation adjustment is $214.12 without the 23.45% discount of refurbishment). The savings of $50.22 are added to the $51.05 already in the account, brining the new total to $101.27. The fourth year grows the pot to $104.88, the fifth to $108.61, and the sixth to $112.48. Already the savings from buying the refurbished GPS device is significant.

If we continue this pattern over the course of 10 buying cycles the total amount of money saved on the purchase price of the GPS units will be $704.42. With the power of compounding interest minus taxes this will have grown to $1221.81 – a 72.71% growth. When adjusted for inflation this has the purchasing power to buy an additional 3 refurbished GPS devices. Our twenty-five year old individual (now fifty-five) will have a new device every three years until the age of sixty-four.

The scenario gets even better if the money saved were to be invested in stocks that returned 9% a year. If this were the case, the value of the money saved would be $704.42 (the same as before) but now the interest would have compounded to $2224.09, pushing the total to $2931.51 – a very significant difference. The overall gain would be 314.39%! This money would last indefinitely, supplying a similar caliber GPS debice for the twenty-five year old’s children’s children’s children.

Or, this twenty-five year old could, at age 55, turn this into a 177.79 yearly contribution (interest at 7% a year minus a 3% inflation hedge) and provide anti-viral drugs to 177 individuals in a Malawi village struck by the AIDS pandemic in the first year alone. Just imagine, 177 lives impacted every year forever because you decided to buy a refurbished product to save some money.

This article was included in The Carnival of Personal Finance: American Flag Edition over at Mighty Bargain Hunter