Is Buying a Car a Good Investment?

Buying a car is an expensive purchase and you need to make sure that you get the most for your money. Many people would argue that buying a car is not an investment, as cars typically decrease in value over time, meaning you won’t receive a good return on the money that you put into it. 

Is a car an asset and or an investment?

Investopedia defines an investment as “an asset or item acquired with the goal of generating income or appreciation.” Cars typically depreciate over time, which is why they are often considered to be an asset rather than an investment. An asset is a commodity that has value in it, but is not expected to grow in value or make a profit. There are some expectations to this rule; for example, if you restore a classic car in the hope of selling it for a profit. 

Should I buy a new or used car?

There is a lot of debate over whether it is better to buy a new or a used car. Second-hand cars are significantly cheaper, but new vehicles offer advantages such as enhanced safety and reliability. Here are some of the top pros and cons of owning a new vs used car:

Pros of owning a new car 

  • New cars are fitted with the latest safety technology
  • New cars are more reliable and less likely to break down
  • New cars often come with a generous warranty

Cons of owning a new car

  • New cars are significantly more expensive
  • New cars typically depreciate in value immediately after you drive them

Pros of owning a used car 

  • Used cars are much less expensive and can be paid off quicker
  • Used cars hold their value better than brand-new vehicles

Cons of owning a used car 

  • Used cars are more likely to have faults and expensive repairs
  • There will be less choice available when you buy a used car

Tips to maximize your investment

Buying a car is a big purchase and you want to ensure that you get the most for your money. Do plenty of research before you buy a car, especially if you are purchasing a second-hand vehicle. Choose a reliable model with a good service history and always test drive a car before buying. 

You can also maximize your investment by looking for ways to lower your ongoing auto costs. For example, Root Insurance offers car insurance in Colorado Springs that is based on driver behavior rather than demographics such as age and address. Being a safe driver could save you hundreds of dollars on your car insurance, leading to significant annual cost savings on your car expenses. 

Bottom line

It is unlikely that buying a car will make you any money in the long run. However, owning a car is essential for most people and you can maximize your return by doing your research and choosing a vehicle that will offer both reliability and longevity. Taking good care of your car will also help you get the most out of the money that you spend.