Car Talk

"Let's make a dent in the universe." - Steve Jobs

The other day I read a posting on KateSpillsTheBeans that posed the question about whether a car is a good investment. All the experts will tell you that a car is a “depreciating” asset and it depreciates more quickly when it is newer. Remember, depreciating assets are really just liabilities spruced up to look like an asset.

Would I like to drive a nice car? Of course! Somehow the pre-owned Volvo (circa 2000 with title tucked away in file folder) just doesn’t create the same stir at the valet stand. However, the new car feeling is fleeting and a car payment or lease payment is really one step up from “credit-card” debt. But if you’re not still struggling to pay down a Mastercard balance, then the next best goal is to get your car paid off and drive it into the ground.

This is usually a tough sell in most households. My partner and I have many discussions about this topic. She thinks as “women” we should be driving new cars. I’m not sure if she really believes this or if this is her way of rationalizing the lease payment. I argue that this is why there is Roadside Assistance. Needless to say, I drive a 5-year-old car and she leases a new Saab every three years. Relationships are a series of compromises.

Anyway, Suze Orman often rants on this topic and usually provides some good points. She says, “the cold truth about owning a car: It is a guaranteed money loser.The simple fact is that the minute a new car is driven off the lot it loses up to 20 percent of its value. And it just keeps losing value each day you own it. After four years you'll be lucky if a $50,000 car gets you $20,000 at trade-in.

The reason a car isn't a good investment is simple: Cars aren't investments at all. They're simply tools to get you from point A to point B. Real investments are meant to take you toward wealth and security. An expensive automobile may make you feel like you've arrived, but that's an illusion. If anything, it's likely to carry you farther away from the financial destination you're trying to reach.”

Just for the record, I will own a Mercedes some day… but it will be a used one and purchased with cash – proceeds from one of my fixers/flippers. I’m just doing my first flip though so I still have a few years to cruise in the Volvo. Until then, safety first.