Depreciation on washer/dryer set?
Answer:
I disagree with the first 2 answers. The market value of an item almost never declines evenly over the life of the item (what accountants call straight-line depreciation). The market proice drops very quickly at first because the seller needs to compete with new products. A new product has the advantage that you can choose among many manufacturers, models, features, etc. A new product also offers a warranty so if a defect is found the buyer is protected. Also when an item is defective the owner is more likely to sell it so there's more of a risk of a problem when buying a used item.
Because of that most items depreciate very quickly at first then more slowly as each year goes by. There's not much difference in the price of 3-year-old item and a 4-year-old item but there's a big difference in the price of a new item and nearly new used item.
I suggest determining what the best price is that you can get on a waher/dryer that meets your needs and offer no more than 70% to 80% of that amount for the used set.
You might also check the price on ebay to see what they are selling for there, but include any shipping & handling charges too.
That's why many people get "upside down" on car loans. Even though the car might last 10 years and it's being financed over 4 or 5 years the principal being paid starts small and gets greater each month but the depreciation starts off fast (very fast for some cars) and then slows down as each year passes. So a 1-year-old car might be 15% paid for but might have depreciated by 25% or more.
I will start by saying that the life of the items is how you'd approach it. So with a 7 year life you'd deduct on the following formula:
For each month it would be 1/84th the cost of the combined value.
For 3 months that's 3.57%, etc.
For a 5-year life it would be 1/60th per month or 1.67%, etc.
I might also consider getting them to knock something off the price if heavy damage or known over-use.
But seriously, do you have that bad a relationship with that family member that you need to be so precise and businesslike? I have found that no business arrangement with any family member has left either side without feeling somehow used.
Depending on the quality of the washer/dryer I would estimate it to fully depreciate within 10 years.
Ten years = 120 months
Divide the original price of the washer/dryer by 120 months to determine the depreciation each month. Then multiply by how many months the family member has had it. This is how much to reduce the price by.
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