3 reasons why purchasing a car is a bad investment.

Reason 1: Cars are depreciating assets, meaning they lose value over time, and this is especially noticeable for new cars, where they lose up to 10% once you drive off the lot and another 10-15% over the first year alone. To put that into perspective, purchasing a brand new standard 2020 Hyundai Sonata costs roughly $24,000 (excluding customs), this is assuming you bought it in one go and not over monthly loans where interest rates change the calculation. After the first year its value drops to approximately $19,000 and keeps on losing value on an average rate of 10% annually.

 

Reason 2: The increase in car prices is a lot faster than the raises in wages, five times faster than wages to be precise (Source: The Times). This is due to the rapid development in technology and the implementation of it in new cars.

 

Reason 3: Real estate also depreciates, but only by 2-3% annually. Unlike a car, it makes up for its depreciation in value by increasing the rent at a rate of roughly 2-3% every other year. The reason behind the increase in value is that real estate is limited, and one day there won’t be any land left to build on. And the best part about investing in real estate is that you can start small.

 ‘‘Those little things can add up to make a big difference’’ – Tim McAvoy