Cars are not assets!
Before we begin let define what an asset is, we will use the monetary definition since cars cost money. Definition of an asset: "An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit. Assets are reported on a company's balance sheet and are bought or created to increase a firm's value or benefit the firm's operations. An asset can be thought of as something that, in the future, can generate cash flow, reduce expenses, or improve sales, regardless of whether it's manufacturing equipment or a patent. " (Source: Investopedia)
An asset is something that adds value /hold value.The vast majority of vehicles on their own do neither!
But I use my vehicle to go to work you make money!
You are correct ,and so does everyone else (myself included). I even have my company's name across the side of mine. not that it makes my car valuable but because I use my vehicle to generate income.
The issue is thinking that the money that you spent on that vehicle will hold its value. We all know that cars depreciate (depreciation is the loss in value over time). The very fact cars depreciate over time means that your investment is guaranteed to lose value over time! Example: you buy a vehicle for $30,000 and the depreciation rate for that vehicle is 5% per year that means over the course of 4 years that is $10,000 of value lost. 5% when it comes to cars is exceptional and the truth is that it's usually much higher. The concept of depreciation is common knowledge to most adults however, to younger people or first time car buyers it can be confusing. I know that is how it was for me at least until I got introduced to selling cars professionally! I thought the $10,000 that I bought my first car for was safe, that is until I seen the market value for it and found out that it depreciated to about $3,500 in the course of about 4 years.
Conclusion
To all my inexperienced future car buyers, please keep depreciation in mind when you are budgeting or purchasing your next vehicle!
I wrote this article and many other like it in hopes to educate those who may be unfamiliar with certain concepts related to car buying and selling. As always if you have any questions comments or concerns please feel free to leave them below or reach out to us directly at sales@drivewithjulius.com God bless you and have a wonderful day!