But the Car Is Only Worth $300!
You must have heard this argument when someone is contemplating repairs to an old auto. "It's nuts to put $400 into it when it's only worth $300."
This argument seems to me to be entirely beside the point, unless one is repairing the car in order to sell it. If you intend to drive it, the relevant question is, "Will I get more satisfactory car service from my present car after $400 of repairs or from a $400 slice of another car?"
If, say, $400 of repairs are likely to keep the old car running fine for a year, they are almost certainly the cheapest way to get a year of decent automobile use. Why would the book value of the car make any difference to a person in this situation?
This argument seems to me to be entirely beside the point, unless one is repairing the car in order to sell it. If you intend to drive it, the relevant question is, "Will I get more satisfactory car service from my present car after $400 of repairs or from a $400 slice of another car?"
If, say, $400 of repairs are likely to keep the old car running fine for a year, they are almost certainly the cheapest way to get a year of decent automobile use. Why would the book value of the car make any difference to a person in this situation?
Perhaps you believe that your car's worth of $300 means that you can buy a similar one that runs for less than $400; if you are extremely parsimonious, it may rightly seem nuts to buy the repairs.
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