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I have been reading a lot and doing as much research as I could and need some help to decide whether I could consider the action of buying a car as an investment. This question comes after I can't come to a conclusion myself and would like some help. These are the guidelines I've been using while trying to decide:

  1. Utility comes first. While of course it's nicer to have a brand new Mercedes over a second hand deal, we don't want status (as it's something subjective) in the equation. However, if there is need for a Mercedes (because you are the best financial consultant in the country and you need your assets to show what you are worth) it's very likely that you also have an income proportional to the cost of the car.
  2. Buying a used car. I've read in many places (and from first hand experience given some family members, and friends) that a car in average is worth half its new price over the course of 3 years, and the money used to have it in the best condition will hardly match the loss on price. So this means that the spread between buying price vs. selling price won't be too huge.
  3. Is there something as hourly-worth? This is main issue with my question. The main purpose for buying a car (I believe) is the time saved and how convenient it is to not have to wait for someone to pick you up, or depend on public transportation. Therefore, the main thing that I question is: If I make 96.000/year (figures are meant to provide an easy example only), divided by 1920 (8 hrs a day, times 20 days a month, times 12 months a year) can I actually say my worth is $50/hr? Is the assumption of saying if I save 100hrs a month (5k/month) by driving my car instead of using public transportation which costs me on average 3k, is actually netting me a savings of 2k?
  4. Costs and other risks. Of course, one has to always take into account the costs, insurance, monthly repairs, gas and other factors that come with the fact of owning a vehicle. Those are rather easy to quantify.

After 5 years I decide to get rid of the car, I'm selling it for the average market price (9 years old now), and bought it for average market price as well (4 years old). Looking back, considering the points mentioned and of course any other valid points too, can one possibly say from a personal finance point of view "this car was a good investment"?

sǝɯɐſ
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Celius Stingher
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    Would it be correct to summarise your question as asking how to decide, given the particulars you listed, whether car ownership is financially better for you than using public transport? – Lawrence Oct 08 '19 at 01:33
  • No, I don't think so. The question I want to ask is if given certain circumstances buying a car can be considered as a good (or bad) investment. – Celius Stingher Oct 08 '19 at 02:16
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    @Celius Stingher: A car (or other vehicle) would be an investment if you use it to produce income. It would be a good investment if the income produced is more than the cost plus running expenses. For instance, when I worked in construction, I needed a truck to carry tools and materials to job sites, so that was an investment. – jamesqf Oct 08 '19 at 02:49
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    @jamesqf that vehicle is a capital expenditure which is expensed over time (aka depreciated). https://investinganswers.com/dictionary/c/capital-expenditures – RonJohn Oct 08 '19 at 14:06
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    @jamesqf a classic car that appreciates in value could be an investment without it producing income (instead it produces capital gains) but that's far from the OP's situation – Chris H Oct 08 '19 at 14:58
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    I think this is one of those cases where if you have to ask, the answer is no. – mao47 Oct 08 '19 at 14:58
  • I assume that you also don't want to use this car for car-renting or car-sharing service? (though I'm not sure for the additional policy/law) – Andrew T. Oct 08 '19 at 15:15
  • @Chris H: I didn't say that having a car produce income is the only way it could be an investment. Though I would call classic cars more of a gamble than an investment, since there's really no way to know what cars are going to become, and stay, classics that appreciate. – jamesqf Oct 08 '19 at 17:26
  • @RonJohn: Not necessarily. If it was purchased by a business and used only for business, yes. If it's just the personal vehicle of an employee or independent contractor, probably not. (At least if you want to keep your taxes simple.) Instead, you deduct the IRS mileage rate (58 cents/mile for 2019) for business miles, https://www.irs.gov/taxtopics/tc510 – jamesqf Oct 08 '19 at 17:32
  • Just for reference, read this article about how the fellow made money with his car. Note you said an investment. Buying a car and renting it out or driving it for a ride sharing service would make it an investment - it works for you. https://cleantechnica.com/2019/05/25/the-cost-of-owning-a-tesla-after-200000-miles/ – Tracy Cramer Oct 08 '19 at 19:51
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    "save 100hrs a month ... is actually netting me a savings of 2k" - can you and would you use those 100 hours into generate 2k? If not, then no, you can't say that. Related: How do you value what your leisure time is worth? – NotThatGuy Oct 08 '19 at 22:14
  • In regards to a car losing 50% of its value in 3 years... when I sold cars, a salesperson on one of our lots sold a brand new Dodge Viper (status symbol, high-end vehicle, etc). The buyer returned 1 week and 75 miles driven later to trade it in because they didn't like it as much as they thought, only to find it had lost 1/3 of its value as soon as they pulled it off the lot (since it was considered pre-owned at that moment and who would buy a pre-owned vehicle for 65k (still 10%+ loss) when they could get a new one for 75k. – Bardicer Oct 09 '19 at 00:46
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    A bike is an investment in your health. Cheaper than a gym membership too over time. – Criggie Oct 09 '19 at 08:51
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    @jamesqf A truck you use for work is not an investment - it is a depreciating asset that borders on being a consumable. Owning, operating, and maintaining it is an expense - a cost of doing business. – J... Oct 09 '19 at 11:56
  • @jamesqf "I would call classic cars more of a gamble than an investment, since there's really no way to know what cars are going to become, and stay, classics that appreciate". Same could be said of stocks, real estate and most other things people call investments. – Aubreal Oct 09 '19 at 13:33
  • @J...: It certainly is an investment, just as any other tool you use to produce income is an investment. Of course it's also an asset, and maintaining it is an expense. Same as if you bought for instance an apartment building. It's an investment because you expect it to produce income, an asset because you can sell it (with luck for more than you paid, but not necessarily), and an expense because you need to maintain it. – jamesqf Oct 09 '19 at 16:55
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    Let's not misuse the word "investment" on this site. OP, can you edit it to just say "good (or bad) financial decision" - ? There is utterly nothing in any way related to "investments" here. – Fattie Oct 09 '19 at 16:58
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    I think a lot of people have an overly narrow view of what an investment must produce, as if money is the only measure of profit/utility. In common usage though, we talk about something like a good pair of shoes as an investment (relative to a cheap pair). And for me at least, a car can be seen as investment, whose principal depreciates but which produces a continuous dividend of reliable transportation. Then it is sensible to talk about some cars as "good investments" or "bad investments". – John K Oct 09 '19 at 17:35
  • @jamesqf That's not what the word "investment" means, and it's not at all the same as an apartment building. An investment is an asset that produces income in and of itself. The only circumstance I would admit a vehicle as an investment would be rentals - there you purchase the asset, rent it for income, and then sell it at some point where the return makes sense. The cost of ownership of the vehicle is then negative. In all other cases the vehicle has a positive cost of ownership which falls under the general category of business expense - the cost of the utility of having the vehicle. – J... Oct 09 '19 at 18:36
  • @J... What exactly is that definition? As there has been extensive discussion and ive heard many different things even on this site. – Vality Oct 09 '19 at 19:53
  • @J... No matter how many sources I check (Wikipedia, Investopedia, a dictionary, accounting standards), I cannot seem to find your strict definition. Most places define it as the allocation of resources with the hope of some kind of return, which is not just limited to income. The purchase of a vehicle for a business is indeed an investment. Yes, you make losses via depreciation and maintenance but that misses the essential point which is that you make the purchase with the aim of making an overall profit due to the use of that asset. – JBentley Oct 09 '19 at 20:01
  • @J... Also on what basis are you distinguishing a vehicle bought for profit generation, from an apartment bought for profit generation? The apartment doesn't generate income "in and of itself" any more than the vehicle. Both have maintenance costs, and both require you to do something with it to produce an income. They are both fixed investments (see the second paragraph). – JBentley Oct 09 '19 at 22:01
  • @JBentley The apartment has intrinsic value that appreciates - you can buy it, extract the 'profit' of living in it, carry the expense of maintaining it, and sell it later. It holds value and can easily gain value over time. A vehicle has a short lifespan and its value degrades progressively as you use it. You would consider acquiring a vehicle as a capital expenditure, and accountants would generally list this under the 'investment activities' umbrella of the balance sheet, to be fair, but the vehicle is not the store of value itself - its value is eroded in the act of producing profit. – J... Oct 09 '19 at 22:13
  • @J... You have some misconceptions. An apartment does not have "intrinsic value that appreciates". On the contrary, it depreciates just like the car does (it gets worn out, requires repairs, etc.). It's just that cars tend to depreciate more and faster. An apartment also doesn't "intrinsically" gain value any more than the car. If it gains value, it is because supply/demand has applied an upward price pressure that outweighs the depreciation. Equally it can lose a LOT of value over time. Buildings and vehicles are treated exactly the same on the balance sheet. They are both fixed assets. – JBentley Oct 09 '19 at 22:20
  • @JBentley A maintained apartment's price can go up and down, sure - but it is governed by supply and demand. If you maintain it, it holds that intrinsic value. The market may not price it at the same price and, sure, you can lose money, but it's not necessarily because the apartment is, say, 40% through its expected lifespan and will be expected to fail to house people in 4-6 years, for example. A vehicle, at a certain age, is simply not economical to continue repairing and its value effectively goes to zero because of fundamentals - it is no longer capable of performing its intended function. – J... Oct 09 '19 at 22:26
  • @JBentley I mean, taken to the absurd, would you consider a pencil an investment? You could sell it at half-length for some laughable discounted price (just like a vehicle), it helps you generate profit because it's a tool you need (just like a vehicle), it has a pretty well defined lifetime and will need to be re-invested in once the current pencil reaches EOL (just like a vehicle). – J... Oct 09 '19 at 22:28
  • @J...: Please provide a link to the dictionary you're using. A quick search for definitions produces different results, e.g: https://www.investopedia.com/terms/i/investment.asp https://www.merriam-webster.com/dictionary/investment http://www.businessdictionary.com/definition/investment.html Also, a vehicle does not necessarily have a short lifespan. For instance, my 1988 Toyota pickup is perfectly serviceable, and I would have no problems using it in construction if I still did that for money. – jamesqf Oct 10 '19 at 02:19
  • @jamesqf I'm going to leave the discussion here so as not to drag out the comments. I'll just add that what you're saying is contrary to internationally accepted accounting conventions. See for example the comments on this answer and note from the other commenter's profile that he is an accountant. You can verify this also with just about any accountant or accounting book. Finally, I'll note that none of your links support your narrow definition (i.e. that the item itself must somehow intrinsically generate income). – JBentley Oct 10 '19 at 12:07
  • @JBentley: You seem to have entirely misread what I meant by investment. Mine is a broad definition: anything you use to produce income. That might be the construction worker's pickup, the building and machinery of a factory, or whatever. – jamesqf Oct 10 '19 at 16:54
  • @jamesqf But you are narrowing it by not including a vehicle which is purchased with the primary purpose of producing an income (consider e.g. a delivery van). – JBentley Oct 10 '19 at 17:23
  • @JBentley: On the contrary, I AM including vehicles whose primary purpose is to produce income. In fact, the example I gave (3rd comment) of me purchasing a truck for construction work was just such a case. That I also occasionally used it for personal things was very much secondary. – jamesqf Oct 12 '19 at 02:41
  • @jamesqf I apologise, my comments were actually meant to be directed at "J..." (since the "pencil" comment a few above this one). I guess it must have autofilled it to your username since it starts with a J, and then I subsequently didn't notice/realise! I am in agreement with you – JBentley Oct 14 '19 at 03:35
  • So is the car an investment? Did you buy the car Ivan? – Yoshi Onimusha Dec 02 '19 at 12:43
  • I did not! I do plan on buying it in a semi-near future, but as for 2019, it's going to end car-less! Cheers and thanks a lot for the answers. – Celius Stingher Dec 02 '19 at 13:48

8 Answers8

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A few points.

  1. You may be interested in this website which helps you calculate the total cost of car ownership, and factors in things like insurance, gas, mileage, repairs, registration, etc... These costs are not inconsequential and have a tendency to add up.

  2. Even this calculator doesn't consider all the costs though because it ignores the lost opportunity costs-- i.e. the amount of money you could make by investing the cost of the car. e.g. If you buy a $10,000 car you could have taken that money and invested it instead where it could have earned 10% per year. So you're essentially missing out on an extra $1000 a year by buying a car.

  3. People love to find fault with public transportation, and only focus on the negative aspects e.g. the extra time you spend waiting for the bus, etc... This can be seen in your question where you calculate the amount of time that you save by owning a car compared to waiting for a bus. The problem with this is: It doesn't take into account the other hours you spend on car upkeep and maintenance and all the associated aspects of owning a car (e.g. shoveling your driveway); it ignores the fact that time spent on public transit can be productive-- e.g. you can work on the bus or the train but you can't safely/easily work in a car that you're driving; it ignores the mental benefits-- studies regularly show that people who take public transit have lower stress levels; and it ignores the fact that public transit is on average 10 times safer than driving a car.

  4. If you are driving primarily for work you may be able to write-off some of the costs of ownership/miles driven. Check your local tax law as this may provide you a tax break.

So to answer your question I'd never consider a car an investment, but in some circumstances it may be a useful money saver. However, if you've been able to do your job this entire time without relying on one I would suspect it's not going to save you money.

Machavity
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Dugan
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    Wow! This answer is awesome, great insight and useful information that should always be taken into account. Thanks a lot! – Celius Stingher Oct 08 '19 at 13:54
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    Where I live, the buses come every half hour and don't go anywhere near I want to go. And it rains; I don't really feel like getting wet walking to and from the uncovered bus stop. – RonJohn Oct 08 '19 at 14:01
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    @RonJohn agreed-- some people don't live near good public transit. Or if they had a car they'd be able to drive to a better/higher paying job. I'm not saying that car ownership is bad in all cases, just that people should be realistic about the costs/savings. – Dugan Oct 08 '19 at 14:34
  • @Celius Stingher Also, here's an info-graphic that breaks down the cost of commuting and suggests that the cost of driving to work can add up to over $795 per mile every year. – Dugan Oct 08 '19 at 14:37
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    Source on "invested it instead where it could have earned 10% per year"? Because saying "you're essentially missing out on an extra $1000 a year by buying a car" is very misleading. – user2397282 Oct 08 '19 at 15:19
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    @user2397282 "The stock market has historically returned an average of 10% annually. " (Source) So a total stock market index fund with a low MER like Vanguard's VTSAX would get you about 10% growth per year. – Dugan Oct 08 '19 at 15:27
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    @RonJohn I think that's a slightly different situation. If an area doesn't offer public transit that meets your needs, then the cost of owning and operating a car should be factored in as a part of the cost of living in the area and not a separate investment. Without a workable alternative mode of transportation, owning a car can't offer "savings" over anything else because there are no other choices. – Upper_Case Oct 08 '19 at 17:44
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    @Upper_Case Manhattan and parts of Chicago and Boston are probably the only places in the US where it's feasible not own a car. (And I say this as someone who medically can't drive so don't own a car.) – RonJohn Oct 08 '19 at 18:23
  • @Dugan The annual average return of the stock market depends strongly on the time period chosen, and there are reasons to believe it will not be nearly as good in the future. The FTSE 100 has increased by about 10% in total over the past 20 years (after increasing about 4-fold in the 10 years prior). It would seem irresponsible to assume that the total average geometric growth is going to hold over the next 20–50 years (let alone shorter timescales). – gerrit Oct 08 '19 at 19:05
  • @RonJohn Flat-out false. I lived elsewhere for over a decade with no car and managed to get around just fine (though public transit didn't always make it convenient), including social events, full-time work, and full-time graduate school. There are lots of local factors that affect how feasible it is, but it's not impossible to find walkable communities or adequate bus/train service. Regardless, my point was that if there is no alternative to car ownership in an area then buying a car isn't a money-saving investment in the manner the OP is describing, whatever other virtues it might have. – Upper_Case Oct 08 '19 at 19:08
  • @Upper_Case when I was in college, I also was able to ride my bike most places. Going to any grocery store cheaper than a bodega absolutely required a car. And you were out of luck if carrying large bags of groceries back from the bus stop when it started to rain. – RonJohn Oct 08 '19 at 19:35
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    @RonJohn It's annoying, but I've carried heavy grocery bags in the rain. But, again, if it's a feature of where you live that places you need to go to are spread out over auto-only distances and public transit is not an option at all, then your cost to live there will have to include a car. Then buying a car isn't a money-saving investment, as described in the question, but an expense on par with rent/mortgage. Choosing to live in such an area is thus similar to living in an area with high rents. I am not disputing that having a car is convenient, relative to many other options. – Upper_Case Oct 08 '19 at 19:51
  • @gerrit I disagree that predicting 10% growth is irresponsible. While there are a lot of reasons "to believe it will not be nearly as good in the future." There are many who predict it will be as good or even better. Predicting 10% growth is based on a 100 year average, and even if you pick random 20 year stretches throughout that time it holds pretty close to that for the most part. My main point though was that money that is invested in a car declines in value. Money invested in equities, or other sources has the potential to grow. – Dugan Oct 08 '19 at 20:17
  • @Dugan Predicting isn't irresponsible, assuming is irresponsible. With the imminent ecological collapse that is upon us, I would consider it extremely unlikely that the past 100 years will be repeated. Anyone can predict what they want, of course. Assuming implies a level of certainty. – gerrit Oct 08 '19 at 20:59
  • @Dugan you're still being misleading - US markets are up pretty dramatically in the last ten years as we've been recovering from a very large recession - therefore any ETF or mutual fund tracking broad swaths of the US market will necessarily have a high return. This only reflects a current moment in time - not reliable behavior (something the article you linked even hints at). Furthermore, this ignores the other costs of not having a car - cost of mass transit/taxis or less time to work due to walking everywhere, etc. – jayce Oct 08 '19 at 22:07
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    @jayce 1. Pick whatever time period you want. Over the long-term a total stock market tracking index will beat almost any managed fund or investment you care to name (See Warren Buffet's bet against Protégé Partners LLC). 2. Stocks/investments have the potential to increase in value cars (for the most part) do not. The degree to which stocks beat cars is semantics. 3. I'm not ignoring the costs of public transit. OP included those in his question, so not going to bother reiterating. – Dugan Oct 08 '19 at 22:32
  • @Dugan now you are moving the goal posts. no one is arguing that cars are a better investment vehicle. your assumptions of market earnings are way off (again because current markets skew to deceptively high returns relative to the last ten years) and again you ignore the costs associated with not owning a car. – jayce Oct 08 '19 at 23:07
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    @RonJohn That's wrong. There are hundreds of places all over the US where carless living is feasible. Little Five Points GA, Royal Oak MI, Jefferson City MO (hard to go wrong in a college town), San Mateo CA, Westfield NJ, Dayton OH... It is a matter of selecting your home and workplace with transitability a top factor* instead of driving to every house showing and never even thinking about transit til you need it. Try it, it works much* better... – Harper - Reinstate Monica Oct 09 '19 at 01:49
  • @Harper I checked the real estate in Little Five Points GA and Royal Oak MI. All the houses had driveways, which tells me all I need to know about "carless" living. I've always lived a mile from a grocery store, and lived either crossways or opposite from the flow of traffic from work (before I had to stop driving for medical reasons). Taking the bus to the Home Depot to shop for a light fixture is... tenable, at best. – RonJohn Oct 09 '19 at 02:15
  • Driving is a time saver only if you arrive home safely. I've had, on more than one occasion, had to take at least a 30 minute nap after work due to how late it was. If I took the bus I could've just nap on the bus and travel while asleep. Highly do not recommend sleeping while driving... – Nelson Oct 09 '19 at 03:42
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    @RonJohn Those are streetcar suburbs, so those houses were built when private, profitable rail public transit ran right down their streets. Garages were pretty standard even then. That does not indicate the transit is bad. For me, Home Depot is 3 miles away, 1-bus straight shot. But the bus passes 2 proper lighting supply houses on its way, so why go all the way to HD? – Harper - Reinstate Monica Oct 09 '19 at 05:48
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    @RonJohn: 1. Often, when people complain about rain, they live in regions where it actually rains just some days / month, and even then you'd have to be "lucky" to hit the shower. E.g., I e-cycle to work for quite a while now; there were some "rain days" as per weather reports, but actually, only in few cases (< 5 in last 6 months) I needed to strap over my rain suit. And Germany is not known for great weather. 2. Rain is just water, as is 60 % of my body. It's not really bad. 3. If rain is a problem for your groceries, then the real problem is not having your own bag/backpack. – phresnel Oct 09 '19 at 08:34
  • @jayce I've seen an 11.24% return on VTSAX since January, so it's not unrealistic. If you want to speculate that it's going to take a nose-dive in the future that's your business. Obviously no one can say for certain what future returns will be, but you can generally be confident that they will be better than the ROI of a car. That's all I meant. Apologies if you view that as moving the goal posts. As previously stated I didn't mention the savings of having a car in my answer since the original post covered this in the 3rd point in their question. Feel free to provide your own answer though. – Dugan Oct 09 '19 at 13:22
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    @Dugan I understand the point you are trying to make but a ten-month return isn't remotely comparable to a ten-year return. Again no one is arguing that the car is the better investment - only that your assumptions in assessing lost opportunity cost are overly generous. BTW your high return on VTSAX is itself a product of recovery (late Dec - early Jan saw a rapid selloff of stocks) - the same phenomena that artificially inflates ten-year returns across the entire market. You got lucky - that's not the same as a good investment. – jayce Oct 09 '19 at 13:51
  • @RonJohn, what's this about needing a car to take advantage of cheap (presumably, bulk) groceries? I've been using a cargo bike for my Costco shopping for years, across two cities (first Austin, now Chicago). – Charles Duffy Oct 09 '19 at 20:37
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    Yeah on your #3, I had to take the bus before I could get my first car to work. Every winter I'd get sick due to the EXCELLENT UK weather and the not so excellent bus schedule. Also with a car you can buy groceries for the entire week. On foot you can only carry so much so a daily shopping trip is required... private transport > public transport! – Иво Недев Oct 10 '19 at 07:42
  • That might be the worst most misleading and most hilarious info graphic I have ever seen. And almost no one buys a "$10,000 car" with $10,000; usually its a "$225 per month for 60 months car" so generally the investment discussion is moot – quid Oct 10 '19 at 15:07
  • @quid lost opportunity costs exist anytime that you have your money tied up in a physical asset-- be it a car, house, or precious metal. If you are considering the money that you'll get back when you sell the car then you should also consider how much interest that money could have been earning if it was sitting in an investment account instead. The math used to calculate the value is just slightly different between buying it outright versus paying in installments. If you have an issue with the numbers in the info-graphic I think it would be more helpful if you make a more specific criticism. – Dugan Oct 10 '19 at 21:39
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    Your contention is that the $10,000 could have been invested as an alternative to buying the car. But, in reality, in most cases there was no $10,000, there was $225 (or whatever) per month with some interest charges because the car was bought with a loan. I have an issue with the whole entire info-graphic, the most glaringly inane part is including a value to commute time based on your rate of pay at work. – quid Oct 10 '19 at 21:48
  • Your 2nd point helped me understand the concept of opportunity cost better than any other example I've come across. – Uzair A. Oct 27 '19 at 04:53
  • @Uzair A. Happy to help— it’s also worthwhile applying that analysis to whether you should rent or buy a house— lots of sunk opportunity costs there. – Dugan Oct 27 '19 at 17:03
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No doubt about it: vehicles are capital expenditures which depreciate over time.

Referring to a car as "a good investment" because it hasn't depreciated very much is metaphorical.

Having said that, the exception that proves the rule are low-supply, high-demand antique and specialty cars.

RonJohn
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    I think you are making a distinction without a difference - this 'capital asset' [not capital expense, which is not a used term] purchased by an individual would be reasonably considered an 'investment' by all but the most retentive accountants if it provides avenues to higher income. Telling a layperson 'This thing is not an investment, it is a thing that works exactly the way you use the word investment, but actually it is entirely a different thing' isn't terribly helpful. The side-glance at antique cars is just misdirection. – Grade 'Eh' Bacon Oct 08 '19 at 15:16
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    @Grade'Eh'Bacon the word I should have used was "expenditure", not "expense". They're assets, but that doesn't mean they are investments, no matter how much you need it to make more money. (Computers, too, are assets needed to make more money, but they aren't investments.) – RonJohn Oct 08 '19 at 15:22
  • When someone says college is 'making an investment in themselves', it is irrelevant that this cost will not be eligible for treatment as-such on GAAP-compliant financial statements. That wording is perfectly intuitive in that case as in this one, and therefore valuable to a non-accountant. – Grade 'Eh' Bacon Oct 08 '19 at 15:46
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    @Grade'Eh'Bacon and I think "college is an investment in yourself" is a metaphor. Cars are no different than any other depreciating asset like computer equipment. – RonJohn Oct 08 '19 at 15:52
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    I agree with @Grade'Eh'Bacon. Considering the purchase of an asset, which results in the generation of profit, to not be an investment merely because the asset itself has some costs, is illogical. Compare for example a new startup company that purchases a van with the expectation of making a profit. Not an investment? What about the person who provided the share capital for that company. That is undeniably an investment. Yet, we are essentially talking about the same allocation of resources. – JBentley Oct 09 '19 at 20:09
  • This is also counter to widely accepted accounting terminology. See for example here which specifically gives vehicles as an example. – JBentley Oct 09 '19 at 20:12
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Beware confirmation bias

I have been reading a lot and doing as much research as I could and need some help to decide whether I could consider the action of buying a car as an investment.

Oh, you have to be very careful here, of confirmation bias. Deciding which conclusion you want to reach, and then searching for the facts that support reaching that conclusion. The problem is, this also avoids searching for facts which do not support that conclusion.

For instance, the phrase "car as an investment". No credible source would ever speak those words, for reasons which other answers have illuminated brilliantly.

Cars are a total financial loss

There is no math in which you buy a car and resell it for more, unless you are the guy on Counting Cars. It would be neat if you were, because it would mean you could make car economics non-insane.

Here's an example. My poor car has been away from its maintenance base for 3 years. I took it to the diagnostic guy and he game me 40 things that need fixing. About 2/3 are done and I'm $300 into it; I have about another $300 to tick 'em all off. Speaking of "ticking off", people are going "hey, how are you getting one thing fixed for $300, let alone 25?" Because I do my own work, and I have a very old, cheap car.

And because of that, I can confine my auto expenses to $2000/year, if I'm dishonest with myself about my actual costs like most people are. Of course I spend much more.

See, I have the skill to make a car an investment if that were possible. It's not. So I simply do all I can to limit my losses.

And I know perfectly well I could have these losses at a much larger scale, e.g. I could drive a Tesla and have essentially 0 maintenance costs and massive lease costs, or drive an 80's Porsche and do the same thing with parts costing 5x as much.

Forget transit... unless you didn't.

If you pick any random piece of housing stock in America, the transit is practically unusable. Because in the massive post-WWII housing boom, sprawling developments were built, and transit was not only forgotten, but intentionally excluded, in a misguided goal of "keeping out the riff-raff". Even today, they like to "wall" developments. When the 80's transit resurgence began, they tried to "bolt on" transit to these sprawl developments, but it creates hopeless, gerrymandered routes that aren't efficient. Transit needs to be built first, then the development to the transit. Take Los Angeles, they're just building on the old Red Car lines! Which means they are serving old development that was built because of the Red Car lines. Postwar sprawlburbs will never get usable service.

Fire up Google Earth and look at Europe, and you'll see much the same, lots of farms turned into walled-off, transit-sterile housing estates. Of course the government requires some perfunctory sort of transit in order to permit the development, so some sad little shuttle bus trots through every 1/2 hour to take you to the train station. Totally impractical for living carless.

Here's the thing. There are hundreds of places in America (and other countries) with good transit. But they're not random. They have good transit for a reason, often relating to history, the lay of the land, a rail tunnel driven 100 years ago, whatever. But these places don't jump out at you when you do a car-based house search, in fact, they kinda do the opposite, they hide behind their typically older housing stock with character and grit, in neighbohoods that feel unsecluded. So transit-blind house searches tend to go straight to Car-land.

On the other hand, if the people who picked this house did the homework and made transit part of their decision, different deal. That's when you find "Oh look, 2 major trunklines to employment areas run just blocks from here". Point is, that doesn't happen by accident.

The value of your time

Quick question. When you get off work, do you log into Uber and start giving people rides? No, you say, because you don't want that experience?

Well, guess what. You're gonna get it. When you are driving a car, that is 100% your job. There's no practical way to "2-screen" the driving task. If you don't drive yet, there's plenty that it is your job to notice. Other drivers are careless, and you spend 80% of your attention bandwidth protecting yourself from them. Even on open road, stuff just happens way too fast - 2 seconds of distraction and you're hitting the rumble strips. "Autopilots" make it worse, because humans suck at monitoring automated systems that work 99.9% of the and suddenly do the wrong thing. (That woman did everything right, but just couldn't respond quickly enough when she witnessed the highly improbable.)

You can't read email, you can't text... it's been tried to death. In fact, the hard science shows talking on the phone with a handsfree is still distracted driving. It's not where your hand is; it's where your mind is. NTSB states it plainly:

No electronics should be used in cars, except that which assists the driving task.

So yeah. When you're behind the wheel, you are 100% an Uber driver to yourself. That big block of time is wasted.

Having belabored that point to death...

In the 90s I had this amazing thing called a Ricochet modem. It was a "cellular" data service that worked. It was amazing, it completely changed the value of my time on public transit. It made me choose public transit over driving.

Of course now, we take mobile data for granted. And you can do important work like Tinder right there on the bus or train. The value of this cannot be overstated. Of course you should have awareness of your surroundings, but I find 80% of my time on transit can be put to good use. Driving can't say the same.

Harper - Reinstate Monica
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  • Thank you for a complete and great answer!! Really liked the psychology in it as well. – Celius Stingher Oct 09 '19 at 13:06
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    important work like Tinder" - it's better to relax after work instead of amplifying your frustration – user11153 Oct 09 '19 at 13:19
  • @user11153 when you look around transit cars, you see a lot of people swiping left, or whatever you do on that thing... – Harper - Reinstate Monica Oct 09 '19 at 18:06
  • Why bring up the 3rd and 4th section? There's nothing in the question or in the OP's comment replies about public transport. It only distracts from the core points in the first two sections. –  Oct 10 '19 at 09:43
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I may be focusing on just the words here, but "Investment" has a particular meaning. In the real world, my wife has used phrases like "I need to invest in a new pair of shoes". I suppress the urge to shout that routine purchases like this are not investments, they are just purchases. But, I keep my mouth shut, as she needed new shoes.

I bought a treadmill. Actually, I bought one to replace the treadmill that, after 20+ years of obsessive use, died. The purchase, 2 decades ago, saved me the cost of gym membership, along with the round trip time to the gym. I could go down the path you are, with similar logic, and even separate the actual dollars saved vs perceived value of my time.

In your case, careful analysis can help you decide whether a purchase is worth it, including spending a bit of money to buy back some for your own free time, but in the end, I view it as just that, thoughtful analysis, and not the license to call such purchases "investments".

verb (used with object)

  • to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value.

  • to use (money), as in accumulating something: to invest large sums in books.

  • to use, give, or devote (time, talent, etc.), as for a purpose or to achieve something: He invested a lot of time in helping retarded children.

Above is the Dictionary definition. I include it, and offer the fact that words also have secondary/tertiary meaning, and that in normal conversation some might use the word as you suggest. Still I'll maintain I wouldn't do so under the guise of personal finance.

Edit - I included the dictionary quote to offer my own understanding that the word itself has multiple common uses. Still I was taken aback at the use of the word ‘retard’. I requested that the definition be updated, and they (dictionary.com) agreed. I’ll edit again, once I see the new example sentence.

JTP - Apologise to Monica
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  • When people talk about purchasing goods as investing, I sometimes think of it like this: if you need a new pair of shoes, you effectively have a sunk cost of the minimum amount that it will take to buy shoes (say, $30). But you might choose to "invest" an extra $90 by buying a more expensive pair of shoes that will last two years, instead of the cheap $30 pair that would need replacement after 4 months. So, like an investment, you put in $90 up front and after two years you've only spent $120 on one pair of shoes instead of $180 on six pairs, thus "earning" $60 on your "investment". – David Z Oct 08 '19 at 20:52
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    Though of course I'm aware that, in practice, people do also just use "invest" to mean, essentially, "spend". – David Z Oct 08 '19 at 20:53
  • Can you tell, I tiptoed around declaring it "wrong"? Even offering the fact that the dictionary (literally dictionary.com) offers a use similar to OP. Yet, it also used the word 'retarded' which I swear was changed due to political correctness. – JTP - Apologise to Monica Oct 08 '19 at 20:58
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    While I upvoted the answer, I'm disappointed in the political commentary. As someone who is physically retarded, it it completely obvious that the word for "delay or hold back in terms of progress, development, or accomplishment" is perfectly justified when describing some people's physical or mental conditions. – RonJohn Oct 09 '19 at 20:48
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    I'm glad you mentioned it, though, because it gave me the opportunity to contact them and make the case that "retarded" is a valid use in the situation. – RonJohn Oct 09 '19 at 20:55
  • They have assured me, it will be removed from the example, and I will edit accordingly. The word is no longer used for those with such disabilities. “Crippled” is out as well. – JTP - Apologise to Monica Oct 09 '19 at 21:02
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Cars are only good investments in certain cases.

Brand new cars

As little time as they take to maintain, they depreciate as soon as you sign the loan papers. They will also continue to depreciate rapidly over the first 5 years or so. Also, when they do break down, the repairs are likely to be more expensive. Insurance and registration is going to be high on these cars, too. You don't start to see things turning in your favor until at least the 5 year mark. For really expensive cars, think more like 10 years.

Even electric and hybrid cars will depreciate quickly and their repairs are even more expensive than other new cars. And because of their high initial cost and high cost of repairs, etc., you really aren't gaining anything by not having to buy fuel for at least 4-5 years.

Used cars

Depending on how old it is, how many miles, how the previous owner treated it, recalls, and so much more, it may or may not be a good way to go. Doing your research, as with anything, will show you which used cars are likely to be a better use of your money. Older cars do break down more often, but their parts are also easier to find and cost less because of it. Also, being able to do basic and some medium level repairs will save you money.

In some places, like Iowa, you automatically get a greatly reduced registration rate once the vehicle hits 10 years old.

If you get the "right" car, which you sometimes can't know until after your purchase, maintaining it will determine if it's an investment or not. If you're having to constantly do major repairs, it's not likely worth it. If the trim and headliner falls off, but the drive train, breaks, and other mechanical components are solid, requiring minimal maintenance, you have an investment. In this case, the term "investment" means you aren't paying more for something else to do the same function.

Sports/performance cars

These are a money pit. They cost a lot everywhere. They can pass everything except for a gas station. They often need specialty tires, insurance is high, and if you don't keep off the gas, you'll be paying speeding tickets.

Classic cars

These are borderline investments. Their parts are getting scarce, they may break down more often, they aren't for daily driving, and to get good repair service, you have to pay more for it. These also have a higher price to buy, to insure, and at the pump. New tires might not be available for some really old cars. I've seen common classic cars that were more expensive than new sports luxury cars.

These cars are literally not being made anymore. Your 1990 Honda, your 2001 Mustang, and your 2009 Prius are never going to be considered Classics. They may legally be considered a classic car eventually, but not to any real "car guy/girl".

https://en.wikipedia.org/wiki/Classic_car

Public transportation

Some places have great public transit and others don't. In fact, I'd have to say that most places don't. Even when the service has high availability, too often the departments in charge of them are under funded, under staffed, and get too much use to maintain their vehicles well. Even when they have law enforcement available, there's still possibilities for crime, distractions from other customers, and just plain forgetting things when you exit.

If you are able to use it, it's clean and comfortable, and you are able to be productive at the same time, that's great. Use it. It really can reduce stress by not having to pay for and maintain a vehicle, but it can also add to stress when you miss it, miss your stop, or have to deal with SOB riders.

Personally

I'd rather have a car than not. Most places have no or very limited public transit. I've recently moved to a large city that has good public transit and I tried it for a while. I'm not a fan. You have to know exactly where you're going before you ever step on the vehicle and if you make any mistake, you're going to take a minimum of 2x as long. Not to mention that public transit can easily take 3x as long as driving even when you do things right, but this also depends on the metro area. Chicago, New York, and other huge metro areas might take less time in public transit than driving.

I've learned, the hard way, how to do most repairs on my own vehicles. Through blood, sweat, and swears, I've avoided at least half the costs of repairs. I've also owned 2 cars simultaneously for most of the time I've owned cars so when one dies, I can switch to the other. Right now I have 1 car that needs a motor replaced and I'm seriously considering throwing in an electric package instead of a gas engine again. It'll cost more than the car is worth to someone else, but I really like the car, so I'm ignoring the bit of it being a "bad" investment. The engine model was a known issue from the factory, so I'm not going to replace it with the same thing, that's for sure.

Conclusion

The purchase of a car is an expense. How you treat it and how it treats you determines whether it's an investment or not. The longer you own a car generally helps determine if the car was worth the purchase and keeping a car until it's too expensive to fix is usually the best way to know you got the most out of that purchase. Public transit can be a good thing, but it's strictly a "YMMV" basis whether it is or not.

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computercarguy
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    "Your 1990 Honda, your 2001 Mustang..." Maybe not to a boomer, but certainly there are going to be Gen X/Y-ers who grew up around the street racing scene. As this group ages, they may desire cars from that era. – Kenneth K. Oct 08 '19 at 17:14
  • @KennethK. as a Gen Xer, I can see people thinking those are desirable, in the same way some people think bell bottoms are desirable. On the whole, most other's won't agree. Even if you aren't into cars, seeing a Belair, a Model T, a Corvette Stingray, or a Rolls Royce is a treat. Seeing a ricer '92 Civic just doesn't have the same appeal. It didn't even in the 90's. And a '01 'Stang looks like a crossbreed of a real Mustang and a Taurus, with the Taurus being the most generic body shaped car of all time, which is why police liked them so much. – computercarguy Oct 08 '19 at 17:24
  • As little time as they take to maintain, they depreciate as soon as you sign the loan papers, surely the price of the car doesn't depend on how it's financed? – gerrit Oct 08 '19 at 19:08
  • @gerrit, actually it can. I've had a friend try to buy a car and the loan company said they wouldn't give a loan on that specific car for over $X, which was a couple thousand over the price on the car. The sales person instantly dropped the price and the loan was given. Also, if you try to sell a car back to a dealer immediately after signing, they are likely to deduct 10% or more as it's now "used". Insurance is likely to sell "gap" insurance because you're likely to owe more on the car than it's worth from it's original purchase price. https://www.iii.org/article/what-gap-insurance – computercarguy Oct 08 '19 at 19:15
  • @computercarguy I was thinking of the resell value; if I buy a used car, then I don't care if the previous owner has debts to pay. Well, maybe it strengthens my negotiation position if I know they're desperate, but that's a rather indirect effect and I'm not sure I'd call that depreciation. – gerrit Oct 08 '19 at 19:23
  • @gerrit, that's not depreciation. Unless they are less than 5 years old, used cars don't have much depreciation left to worry about. Also, what you quoted was about brand new cars, not used cars. Also, depreciation is not about the debt the owner has, it's about the debt the buyer incurs. A new $50k SUV might be only $40k after a year, that's depreciation. If the loan still has $45k on it, that's a gap of $5k. The $5k might be a negotiating term, but it's not depreciation in terms of a sale. – computercarguy Oct 08 '19 at 19:34
  • There is always the option of buying a car you're fairly sure (as in, willing to bet your car on it) will become a classic. Of course, those are pretty poor odds on anything other than a Rolls Royce. – HAEM Oct 09 '19 at 12:56
  • @HAEM, I know people who owned Belair's when they were new(ish), and they never considered they would become the classics they are now. They were "just another car" of the day. But, yeah, unless it's a very high end car that has a very limited production run, new cars today aren't likely to be worth much more than scrap prices in 15-20 years. – computercarguy Oct 09 '19 at 16:00
  • regarding "Sports/performance cars", I consider that an investment in my mental health, I am happy when I drive it, even when I am driving to work! Also, that performance gives me the confidence that I can avoid accidents on the road (if I am paying attention), which reduces my stress while driving compared to say, a compact SUV which has much more utility but a crappy suspension and brakes – Richie Frame Oct 10 '19 at 02:46
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    As an aside, in 2006 here in Australia I considered buying a 1990's R32 GTR Skyline, which at the time was around $18,000 AUD. Now you'll be hard pressed to find one for under $70,000 - a similar example would be an old Ford Falcon GTHO - worth in excess of $150,000 to $2million now. To know what models will become future classics though, that's the gamble. – Aaron Lavers Oct 10 '19 at 06:52
  • Low-volume super/hypercars: a 30-mile 2017 Ford GT just sold for 3x the purchase price after Ford's 2-year no-sell agreement expired. – mao47 Oct 11 '19 at 13:57
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No car purchased to get you from A to B can be considered an investment. All cars depreciate as soon as they are driven. Only collectible or show cars can be investments because they are rare or unique, not driven (accumulate no wear), and make some sort of artistic and/or historical statement.

For any car you would routinely drive, the best you can hope for is to minimize the total cost of ownership over the time you've owned it - minimize purchase cost, insurance, maintenance, repair, and fuel cost, and maximize resale. By this measure, the first car I ever owned was probably the closest I've ever come to a car as a "good investment" - a 1978 Dodge Colt bought for $2,800 (CDN) in 1980 and sold for $2,400 in 1982 (about 2 years use). It wasn't an investment, just a cheap car that served my needs at the time.

Rather than look upon your car as an investment, consider the value for money it delivers. There is the relative convenience and utility of getting you to or from your job or wherever else you need/want to go, and the amount of pleasure you may or may get from whatever comfort or conveniences it offers, and just how it looks. If it delivers the things you value, it isn't in the shop beyond the expected routine, and you're OK with what it costs, it's good value for money... but it's no investment.

Anthony X
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The other answers address buying a car to actually use it for personal purposes and they are true - the car is a financial void.

If you focus on making profit from owning a car there are several options: Look for vintage and special cars and look at special markets. It is a high-risk field and may be called rather speculation than investment.

Ferraris, Buggatis, Lambos and other supercars usually don't lose their price. Special models of Jaguars (E-type), Fords (Mustang) are a good tip after some time. Even Skoda can be be an investment. For example, several years ago one can buy decent 62' Octavia for $100, now they start at $1000 and good ones are even more expensive.

The point is to find the sweet spot, when the car price is minimal and hit the car model that will rise in price.

If you started using the car, in seconds you need to replace fluids, consumables, something gets broken... and the car starts to be a void again.

The only way of making profit from having a car is to have the work where a car is mandatory - deliveries, taxi, on-site-services, car rental.

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I have never met a RICH person, especially an Entrepreneur who said:

  1. Buying a house (home?) on a Mortgage is a good investment (unless you run a legitimate home business).
  2. Buying a car (for non commercial/business purposes) is a good investment.

This was told to me when I was just 23 years old by a successful Entrepreneur.

Now, I am 53, have lived or worked in every type of country on the planet and believe the above. I have owned/used from Nissan/Toyota to Mercedes S-500...

Lets do some simple math:

House on rent: $1,300 per month. Same house on mortgage $1,800 per month (real example from a Canadian). Not considering inflation.

Rent for 20 years: 312,000.00 Same house on mortgage for 10 years: 552,000.00(adjusted with insurance, repairs, etc).

On the 21st year the house you own is going to cost ANOTHER $250,000 for 'code compliance', etc.

If you lose your job, your freedom to move is lost with a mortgage. But, if you rent, even on a lease, you can break it citing that you are unemployed.

Cars don't even need math. When you drive your car out of the dealership it loses its value by 50%.

So, again, at 53 - all these 'financial' games are for 'middle-class' and 'rich.

The old saying applies: "If it is too good to be true, it probably isn't".

Trust this helps and as 'food for thought'...

Mr. de Silva
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    "House on rent: $1,300 per month. Same house on mortgage $1,800 per month (real example from a Canadian). Not considering inflation." Definitely not where I live in the US. Rents are much higher than base mortgage payments. – RonJohn Oct 10 '19 at 03:36
  • Also, I did the math on renting vs mortgage, and mortgage easily came out on top. – RonJohn Oct 10 '19 at 03:36
  • @RonJohn: Can you share your math on mortgage vs renting. – Mr. de Silva Oct 10 '19 at 04:42
  • If rent is not affordable a person can move, but NOT when in a mortgage. – Mr. de Silva Oct 10 '19 at 06:00