Cars are not financial investments

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Gold Bullion

Cars are not great investments in the way that gold is. Image from Wikimedia Commons.

A lot of people will recite religiously that buying a new car is an investment. Some of them can be, but most cars are not very good investments at all in the traditional sense of the word.

Investments are supposed to make money

An investment, according to Investopedia, is an asset someone buys hoping said asset will generate income or appreciate in value over time. However, as everyone knows, most cars depreciate over time.

According to Edmunds, a car loses 11 percent off the MSRP the second it leaves the lot. If a person were to buy a $200,000 house and immediately be informed after being given the keys by the realtor that the house was then worth $178,000, they would lose their minds.

There is also the cost of insurance, fuel and upkeep. A $25,000 car, according to Forbes, will cost $33,604 to buy, insure, fuel and keep in good condition over five years. No investor anywhere would buy shares in a company and then buy the CEO’s lunch every day.

A few exceptions

Some cars do appreciate in value over time. The only hitch is that for classic cars to be desirable, they were often rare and desirable when they were made, which also means very expensive to begin with.

[It is easy to get a car loan with bad credit]

For instance, according to the Telegraph, an Aston Martin DB5 cost about $15,860 in 1980. Today, it costs almost $460,000. Granted, that is also the model of car Sean Connery drove in the James Bond film “Goldfinger.”

A Lamborghini Miura, when new in 1964, according to TopSpeed, cost $20,000. The same car costs more than $100,000 today. At a March 2011 auction by Gooding and Co., according to GTSpirit.com, a prototype model of a Miura sold for $1.7 million.

Not in the financial sense

The typical car is not a great investment in the strictest sense financially; most cars plummet in value. In the first five years, according to Edmunds, the typical car depreciates by 37 percent. Anyone who buys a share in a company that loses that much in share price over five years would bolt.

However, where a car is an investment is in the reliability of transport or the meaning of the vehicle to the owner. Love is something that can’t be measured; neither is the peace of mind that comes with knowing a car is going to start with every turn of the key. Anyone who has ever owned a real lemon would gladly pay for that.

Sources

Edmunds

Forbes

The Telegraph

Investopedia: http://www.investopedia.com/terms/i/investment.asp#axzz1pn4ejdMa

TopSpeed: http://www.topspeed.com/cars/lamborghini/1966-1974-lamborghini-miura-ar78709.html

GTSpirit: http://www.gtspirit.com/2011/03/20/lamborghini-miura-sold-for-record-breaking-1-705-000/

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