Nowadays cars have become a part of our life. When it comes to buying a new car, it needs a large amount of money. You consider it an investment. But for me, it’s quite the opposite. Buying a car is a potential way of draining your wallet.
It starts right after you buy it. The car needs monthly payment, registration, tax, insurance, fuel, maintenance, repair cost, etc. The general rules of investment are to make you money. But from a car, you would not get any returned money.
Cost of Car Ownership
When buying a car, you have to pay a larger amount. Several other costs include:
- Dealer fees.
- Vehicle registration costs.
- Sales tax of 5-9% of the car’s retail value.
- Insurance costs depend on the driver’s previous history and how costly the car is.
Also, you have to pay a few hundred dollars every year for its maintenance. After a few years of use, you may need to replace a few parts like tires, worn-down cables, batteries, etc.
Are Cars a good investment or not?
You can consider your car an asset but not an investment. You may want to consider buying a car as an investment compared to the other investment cost and the cost of owning a car.
Cars value depreciates over time. It starts just after your car drives out of the showroom. The value depreciates 11-20% and depreciates each year. Whereas if you are investing in real estate, it will help you make money or buy an investment as home value appreciates over time.
When you need money, you can resell your car. But you should know that you will not get the money you spend on it. To recover a good amount from your car, you have to ensure it’s in good condition and well maintained.
If you buy an old used car, you will not lose as much money as you buy a new one. The buying value of a used car depreciates slower, and its price is lower than a new car. Also, the insurance and sales tax would be down.
You do not own the car
When you are financing your car with a car dealer or bank loan. The owner of the vehicle is the bank or dealer. Until the loan is clear, you are paying them to drive their car; you do not lawfully own it. If you fail to pay your installment, they will retake possession of the car and sell it without your permission.
Think before Spend on a Car
You should consider the amount you are spending on your car for various aspects. The automobile experts suggest spending 50% of your annual gross income. Before buying a car, you should consider your income and buy an affordable one. Try to avoid taking loans if possible. This way, you will be in a better financial position, and it will be easy for you to maintain a car.
But do not purchase the cheapest one that will potentially spend too much on repairs; you could buy a used car in good condition with that money. Before buying, make sure the vehicle is in good condition and needs minimum repair and maintenance.
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