Buying a car investment or expense
I had to run into this discussion with one of my colleagues today. Investment is something that should give us some security over the money we have and maybe even give us some returns on top of that. Investments should not be something on which we spend our money but the value keeps depreciating. This is what I had as an argument during the discussion. Glad that it was a smooth conversation that mostly both of us agreed that the Car is just an additional expense and we cannot directly call it an investment.
I understand that in many countries, having a car is something like having a house to live in. It is a basic need. But in countries like India, it is one of the biggest investments someone should be making and we have other comfortable options to commute than using our own transportation. People think a lot before purchasing a car because it is just an additional expense every month and it is also sometimes very costly expense. In a way, we can say that buying a car can be an investment because it is going to improve the quality of life and we can make our own decisions while commuting but it also comes with lots of additional expenses too.
Car is a depreciating asset
We have to understand that Car is a depreciating asset. The value of a car keeps going down every year or whenever there is a new model emerging in the market. In Rich Dad Poor Dad's book, I remember Robert saying that Car loses 40% of its value as soon as it is bought. Some cars may not lose that much value but if the competition is heavy and other car manufacturing companies can come up with cars that have better features for a lower price, then within a year a car can lose its value to a greater extent.
It is also said that it is better to have cars on the road than in our garage. The main reason is that if we keep it idle it is not going to help us in any means and at the same time there is no use in keeping something idle that is a depreciating asset.
Car brings more additional expenses than income
The car never gives us any income unless we do business with that. There are ways in which people hire a driver and make them use the car to generate income for them. But that's business and I'm not even sure if that's a high income. But otherwise, cars can be a pain because it involves fuel cost, insurance cost, and annual maintenance or repair costs. This can end up like a big pain for us as the car gets older.
There are ways in which people trade cards. Sometimes there will be limited edition cards that are collectible assets that appreciate in value. If the car is rare, it can increase in value every year and once listed for sale, it can have a huge demand. This is one very rare reason why cars can be a great investment but otherwise, we can say that cars are a necessary expense because sometimes they are very useful and cannot be avoided if we want to commute at our own convenience.
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