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Your car is not an investment!

I’ve pretty much learned my lesson about depreciation with my first car. I’ve bought it new and after 6 years I donated it to my father, mostly because it lacked AC and engine power. Because it was an affordable cheap car, I gave it everything to keep it in tip-top condition, but didn’t “invest” in improvements. I didn’t track every penny spent on that car, but the values returned by the Car Running Costs Calculator alone hurt. A lot.

I got wiser (or so did I think) and when getting my new car, I went for a second hand with as many options as possible. In this way I won’t lose that much money on depreciation. But when buying a second hand car, in most of the cases you don’t know the history of the car, especially here in Eastern Europe, where cars bought from the junkyard are fixed and look like they are in perfect condition. However, when involved in an accident, they might not protect you in the way they should. Furthermore, nobody would sell you a car that doesn’t need any maintenance or repairs in the next few years just to make you happy. So the first trip should be to a garage where all the consumables would be checked (if you didn’t do this step before buying it) and replaced.

I’ve already shared my car expenses and you could see that after purchasing the car, I’ve spent quite a lot on it just to get it registered and change the necessary consumables, like oil, filters, got winter tires and so on. And I consider my car (a Renault Megane III) an affordable one, not even close to a premium brand, so it’s relatively cheap to maintain. Still, when I made the spreadsheet and saw how much did 1 kilometer cost with it, I said that it was better if I took a cab every time I needed to drive. I know that this will only get better as I put some more kilometers in it, but let’s not forget that I didn’t improve anything on it, I just brought it in a drivable state.

I think for most of us our car is the second most valuable asset (the first one being our home) and especially we guys are somehow emotionally attached to them, so when it comes to spending money on it, we don’t even think about it being a huge black hole in our budget. I often hear people saying that they are going to “invest” in new sport suspensions or new headlights. Unless you own a classic car, which will increase in value in the future, then it is not an investment. Your car may handle better, may look cooler, may be faster in the corners, but it’ll still be sucking money out of your pocket and not putting any of them back.

If you love cars and that’s what you want to spend your money on, there’s no problem, just please don’t fool yourself by calling a new purchase “investment”. Unless you’re a taxi driver or use your car to make a living…

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