When has a piece of equipment paid for itself??

I have encountered a phenomena that wasn't part of the decision process 20-30 years ago when considering new gear. You bought it because had heard it or read bout it etc. The one thing I never thought of was
What will this be worth at some later date? It seems thinking back on the era as absurd as if you would sell your T.V. Everyone seemed to use equipment get it repaired a few time and finall get a new on.
But this was a world without the Audiogons, auction sites, and lists. Just the "Paper."
If you sold something it would be to a friend or just a gift to someones nephew.
A friend of mine was considering buying amps I happen to own myself and find them outrageously good. They are relatively inexpensive mono blocs from China. If compared to another set of "prestige" amps that sound like these they would fetch at least 5 times thev price.
Even though they were lauded by the press with many awards and praise by the pro writers.
My friend turns to and says yes they very, very, good really great but what is their resale value going to be. I said resale whatever for and I don't think they would get you a nicee profit, mostly I was stunned. Since when did we start buying everything in terms of flip-ability.
I buy the gear because I like it and know full well that it will never win me a prestige or pride of ownership prize. In all liklihod I'll keep them for a long time.
I buy gear and keep it despite promising my wife I will sell it.
I will tell you that my old Buddy Trelja is selling some gear made by this firm. In the classifieds now. No it is not meant to be an ad. trust me. I just want to give people a chance to see what I am talking about. Moderators take this out if it offends thee.
Folks who consider resale prices when making a purchase are folks who are on a quest for 'great audio' but have no idea which components will actually work for them and are wise enuf not to believe reviews or consumer indorsements are going to be reliable when it comes to matching their own tastes. Now it has become virtually impossible for most audio enthusiasts to take equipment home from a B&M dealer for an audition - resale is their only recourse. Re Trelja's stuff (for those who don't know he was the company's distributor in the US) resale value for purchasers buying without audition could be a major consideration for reasons Trelja has, himself, posted about them. Too bad for him that he's been very honest. It will have a price.
its like an audio pre-nup.
Some people buy things for personal consumption. They don't care what the resale value is as they will use it until it's worn out.

Other people buy things for investment purposes. Their intent is to resell later at a profit. Perhaps they are in the business of doing this as a means of earning a living. Perhaps they do this to earn money on the side to buy other things in life, or incrementally increase their own system's value beyond what they could afford if buying new. Perhaps they are collectors. Perhaps they do this for the thrill of the hunt. Perhaps they do this because they are hobbyists and like to change equipment for the fun (and frustration) that can result.

This has always existed, not just in audio, but for many things. It's only more noticeable in audio now because places like AudioGon provide a forum for people to meet. People with different motivations were always there. They are just more apparent to you now.
My bought new in 1984 Infinity RSIIa were $2,400. with a nice discount.
Loved them for $20 years
20 years later I sold the parts for over $2,000. and still threw away the woofers and the cabinets.
I guess we need to find out the depreciation value the company has assigned to that piece of equipment based on salvage value over a given period of time. I am in accounting right now and have had to deal wih many of the same questions in homework and exams, the basic principals can be applied to any commercial product sold to a consumer. One must find out how the company will warrant an audio product, years, months and what is the expected costs to repair or replace such item in the future. The company is betting against large amounts of products coming back, but there is an inherent costs allowed for warranty claims on a companies balance sheet to accomodate the estimated warranty claims. This would be good to know as a consumer as to how much the company claims their product is worth after several years. I found this article to be of relevance and I added the poper credits to make sure we are using the source of information properly.

Of course with e-bay, all of that is out the window!

What Is Depreciation?
Depreciation is the process by which a company allocates an asset's cost over the duration of its useful life. Each time a company prepares its financial statements, it records a depreciation expense to allocate a portion of the cost of the buildings, machines or equipment it has purchased to the current fiscal year. The purpose of recording depreciation as an expense is to spread the initial price of the asset over its useful life. For intangible assets - such as brands and intellectual property - this process of allocating costs over time is called amortization. For natural resources - such as minerals, timber and oil reserves - it's called depletion.

Critical assumptions about expensing depreciation are left to the company's management. Management makes the call on the following things:

Method and rate of depreciation
Useful life of the asset
Scrap value of the asset
Calculation Choices
Depending on their own preferences, companies are free to choose from several methods to calculate the depreciation expense. To keep things simple, we'll summarize the two most common methods:

Straight-line method - This takes an estimated scrap value of the asset at the end of its life and subtracts it from its original cost. This result is then divided by management's estimate of the number of useful years of the asset. The company expenses the same amount of depreciation each year. Here is the formula for the straight-line method:

Straight line depreciation = (original costs of asset – scrap value)/est'd asset life

Accelerated Methods - These methods write-off depreciation costs more quickly than the straight-line method. Generally, the purpose behind this is to minimize taxable income. A popular method is the 'double declining balance', which essentially doubles the rate of depreciation of the straight-line method:

Double declining depreciation = 2 x straight line rate
Double Declining Depreciation = 2 x (original costs of asset – scrap value / est'd asset life)

The Impact of Calculation Choices
As an investor, you need to know how the choice of depreciation method affects an income statement and balance sheet in the short term.

Here's an example. Let's say The Tricky Company purchased a new IT system for $2 million. Tricky estimates that the system has a scrap value of $500,000 and reckons it will last 15 years. According to the straight-line depreciation method, Tricky's depreciation expense in the first year after buying the IT system would be calculated as the following:

($2,000,000 - $500,000)/15 = $100,000

According to the accelerated double-declining depreciation, Tricky's depreciation expense in the first year after buying the IT system would be this:

2 x straight line rate = 2 x($2,000,000 - $500,000)/15
2 x straight line rate = $200,000

So, the numbers show that if Tricky uses the straight-line method, depreciation costs on the income statement will be significantly lower in the first years of the asset's life ($100,000 rather than the $200,000 rendered by the accelerated depreciation schedule).

That means there is an impact on earnings. If Tricky is looking to cut costs and boost earnings per share, it will choose the straight-line method, which will boost its bottom line.

A lot of investors believe that book value, or net asset value, offers a fairly precise and unbiased valuation metric. But, again, be careful. Management's choice of depreciation method can also significantly impact book value: determining Tricky's net worth means deducting all external liabilities on the balance sheet from the total assets--after accounting for depreciation. As a result, since the value of net assets doesn't shrink as quickly, straight-line depreciation gives Tricky a bigger book value than the value a faster rate would give.

The Impact of Assumptions
Tricky chose a surprisingly long asset life for its IT system - 15 years. Information technology typically becomes obsolete quite quickly, so most companies depreciate information technology over a shorter period, say, five to eight years.

Then there's the issue of the scrap value that Tricky chose. It's hard to trust that a used, five-year-old system would fetch a quarter of its original value. But perhaps we can see the reason for Tricky's decision: the longer the useful life of an asset and the greater the scrap value, the less its depreciation will be over its life. And a lower depreciation raises reported earnings and boosts book value. Tricky's assumptions, while questionable, will improve the appearance of its fundamentals.

A closer look at depreciation should remind investors that improvements in earnings per share and book value can, in some cases, result from little more than strokes of the pen. Earnings and net asset value that are boosted thanks to the choice of depreciation assumptions have nothing to do with improved business performance, and, in turn, don't signal strong long-term fundamentals.

by Ben McClure, (Contact Author | Biography)

Ben is director of McClure & Co., an independent research and consulting firm that specializes in investment analysis and intelligence. Before founding McClure & Co., Ben was a highly-rated European equities analyst at City of London-based Old Mutual Securities.
When you listen to equipment and you get thinking about how much you paid it makes you smile.
2 Mac 240s
1 Marantz 7C
Pr of Chartwell LS/5as
Sold for 5 times what I paid and accrued years of listening dividends.
For most of us price is important. It determines how much we can participate in our hobby. I always look at the items that are easy to buy and sell and those things that hold their value and see if they can fit into my plans. Somethings, like Mac tuners, are no brainers. My rule is that only new technology justifies new equipment. Turntables, speakers, amplifiers, indeed all analog items are much better values used. Also, buying items that are in demand on the used market means less risk if they do not work out in my system.
I just bought a brand new computer for $250. I use it to listen to internet radio, and for audio analysis. But, consider that a 30 year old Mac tuner or tube amplifier will be worth about the same as it is now in a few years when the computer goes in the trash because no one will take it.
In my opinion, it paid for itself immediately, if it truly involves you in it's musical presentation. Resale value has nothing to do with it.
The wise will always be happy to buy at discount the assets of those who have no care for value and buy at full price.
Thanks for the responses.
My own answer was the price doesn't matter considering the pleasure I get.
All I just think about is, how did I get so lucky. Finally a have a truly fantasticrig. That though happens everytime I listen. I am not kidding .
It took me 6-7 years to piece it together. My other audio was well into the 29 year mark. I was introduced to the term High end.
I just couldn't find the right combination of gear. Some amps were more costly. I tried vintage amps from every era and spent thousands. I laughed at a cable being mportant.
Around the same time as I was getting the new amps. I "downgraded" to the little miracle preamp an AES-3.
Old pal Trelja nailed it when he says you must get tube power amps.
I really don't think well this cost xx dollars and what I could sell it for now.
Lets face it the crappy synergy I kept getting wasn't worth a penny. So it's value was nothing.
I never bought stuff just to sell it . Making money through buying and selling audio is not my idea of a good time.
All of this stuff I say is cheap but only comparitively so.
I happen to collect tubes almost as a different hobby. I will either give them away or get what they are worth I liked them enough to collect them so I don't find pleasure in the profit , if I make one at all a pleasure. Sometimes people ask me for something specific or I do a little advertising within our audio group. People break your stones for such trivial matters and always seem to assume you are out to rip them off. Please!.
One poster said it pays for itself immediatley if you really like it.
I don't care about resale value of these amps I have no plan to sell them. The amps were inexpensive, so if the thought crosses my mind at all.
I think is Wow. Nirvana for such a low price.
One problem is as I said. Is I hate selling but must sell some gear.
Even I think it is insane to have so much stuff doing nothing. I try to sell as quick as possible and take a beating. I just can't take all the nit picking people do .
I think Markphd puts the whole thing into very succinct and understandable terms.

I'm of the same opinion as The Doctor (Mechans) - you need a good tube amplifier to be happy in this hobby.

Over the past five or so years, I've continued to stumble over the products of a company that knock me out whenever I hear them, as they sound more like music than anything else on the market in my opinion. So, while it's taken me a while to get to this point, my current opinion is that I should simply stop fooling around and do what's required to buy it, and try to live happily ever after. Of course, I may get killed by the old audio adage of a product that immediately draws you in will just as quickly leave you hating it, but what the heck...

I have a few lifetime purchases that I'll hold on to, like my Jadis DA60 and my Atma Sphere M60 monos, but apart from them, and the new venture I'm entering in, which has been previously announced by my partner here in another Audiogon thread, I'm going to try a couple of products from the company I've described in the previous paragraph. Hopefully, at that point, as Cyclonicman says, they'll be paid for immediately.
I seldom consider that I have kept few components for more than three years. As such I might be concerned about resale value. I certainly know some people for whom this is an important consideration as well as some who only want big expensive gear for the display purposes.

Well reviewed gear will sell during the period of currency regardless of whether it sounds any good or not. dCs gear is such gear IMHO. Often reviewed gear will resell quickly, again even if it is awful. I better not give any examples here. Some expensive gear will have a short resale window as it is replaced by a new model after a year or two. This is the old American auto manufacturer's method.

Buying gear that sounds good is hard enough, so I usually ignore these considerations. It does cost me money, but hey you only go around once.
A few items that I have owned paid for themselves in full the first time I heard them.

1. Audio Research Ref 3 preamp. When I heard it in my system, I said price be damned, I don't care if I ever get my money back when and if I sell it....it sounded great and it was worth every dime to own it and enjoy it. Paid in full.

2. Sansui TU-X1 tuner. Blew me away the first time I plugged it in and heard it. I paid a fair price for it and immediately got offers to buy it for a lot more than I paid. The enjoyment of owning it far outstripped the increased prices that people were willing to pay me for it. Paid in full.

3. Toshiba XA-2 HD dvd player. Just an incredible hd picture....the upconverted picture was the best on the market. I paid $800 for it and enjoyed every minute of it. When Blu-Ray killed hd-dvd, I sold it for $200 after owning it for only 8 months because the format was dead. Still, the enjoyment of owning it for the short period of time was worth it to me. Paid in full.

4. Marantz BD 8002 Blu-Ray player. I paid $2k for it. I knew going in that I'd never recover the cost of the player. However, the picture that it throws on my giant projector and screen is breath-taking. It was paid in full after the first movie I watched on it. The Blu-Ray and upconverted picture from this unit is jaw-dropping. Paid in full.

Sure, I'd like to recover as much money as possible when I sell a piece of equipt...but, I buy it for my enjoyment..period. I can think of hundred other things to invest in if I wanted to make money...and re-selling audio equipt is certainly not among them.

In 1988 I bought a new BMW 735i. The salesman warned me not to buy a car like that with a 5-speed standard transmission. He was adamant about selling me one with an automatic transmission....he said a car like that would be impossible to get rid of when it came time to sell it. I didn't care....I just loved the way the car drove and handled with a 5-speed. So I bought it with a 5-speed standard transmission, and the salesman just shook his head in disbelief. All of my friends told me I was crazy because no one would buy it when it came time to sell. No one thought to think of the immense joy I got from driving it with a stick-shift. I was sheer pleasure. After six years, I sold it to a buddy that also liked the way it handled,...and got a fair price for it.