Your Car Is An Asset Analysis

762 Words 4 Pages
Is your car an asset? Should you include it in your net worth calculation? How do you know what it’s worth and how much it’s depreciating?

The short answer is yes, generally, your car is an asset. But it’s a different type of asset than other assets. Your car is a depreciating asset. Your car loses value the moment you drive it off the lot and continues to lose value as time goes on.

Why is my car an asset?

Broadly defined, an asset is anything you own. You own your car. Therefore, it’s an asset. But a car is a unique asset because it is a depreciating asset. Usually, you buy an asset as an investment, with the hope that it increases in value over time. For example, if you buy a house, it’s likely that over a period of years, it will appreciate
…show more content…
Your net worth equals your total liabilities subtracted from your total assets (Assets – Liabilities = Net Worth). Because your car is an asset, include it in your net worth calculation. If you have a car loan, include it as a liability in your net worth calculation.

Generally, your net worth calculation should include all your valuables, such as vehicles, real property, and personal property, like jewelry. Whenever you update your net worth, make sure you adjust the value of your vehicles, because they will decrease over
…show more content…
One of the easiest ways for you to find out how much your car is worth is to go to Kelley Blue Book and enter the details about your car. You’ll have the option of choosing “for sale by owner” or “trade-in” value, which will yield different results. Your car is worth more money if you sell it privately than if you trade-in your car at the dealership. One reason is simply convenience. Many buyers find it easier to take their old cars to the dealership and trade them in than to take the time to sell the cars themselves – and they’re willing to take less money to do it. A second reason that trade-ins are bought for less is that the dealership usually won’t sell the car the way that they receive it. The dealership will usually spend money on detailing the car and making small repairs.

If you want to calculate the depreciation of your car instead of using Kelley Blue Book, you can use the standard calculation that your car will depreciate roughly 10-20 percent every year, depending on the make and model. The following standards show how your car may depreciate.

Drive the car off the lot it depreciates 10-15 percent
After one year it depreciates 20-30 percent
After three years it depreciates 40-50

Related Documents