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frugalista

Frugalista's Analogy Of The Week

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The analogy of the limited-edition Delorean

Frugalista's analogy of the week #1

Following in the footsteps of BMW (new Mini) and Volkswagen (new Beetle), Ford decides that it can make a lot of money from re-engineering a cult classic car, The Delorean.

It buys up the rights to the brand etc and engineers a new, flashier version of the car. The catch is, when they buy the rights there is a legal clause which restricts them to making a limited number of new vehicles.

Anyway, the new Delorean is engineered and launched with much fanfare, and it becomes well known that only 100,000 will ever be made. The RRP is £40,000 but the cars are soon changing hands at £60,000 and upwards. Over the course of a year, this climbs to £100,000.

The telly forcasts a glorious sunny weekend and you are a bit of a Delorean fan. You can't afford to buy one of the cars, but you pop down your local Avis car rental with the idea of hiring one for a couple of days. While you can hire most sporty vehicles there for around £500, you are gobsmacked when you learn it will cost £1850 to hire the Delorean for the weekend! Duh of course it is so expensive, there will only ever be a limited number of these cars...

Moral of this week's analogy: When demand for something truly outstrips supply, the cost of renting it rises just like the cost of buying it. So if there is a housing supply shortage, or a surge in housing demand, why have rents risen only slightly above inflation?

frugalista

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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