Gulf Winds Federal Credit Union Blog
Are Cars an Asset or a Liability?

Are Cars an Asset or a Liability?

Our cars may be a necessity for those of us who travel for work and who don’t have access to public transportation, but for most of us, it’s a love/hate relationship. It’s great to have the luxury of a car, but the costs of ownership can be tough to handle.


What are the costs of vehicle ownership?

To assess the costs of owning a car, we must consider each cost inherent in its use:

  • Initial cost – Most people take out loans to pay for their vehicles. Your monthly loan payment is likely the biggest recurring cost of vehicle ownership and must be accounted for until the car is paid off in full.
  • Maintenance – This includes costs like oil changes, brake pad replacements, new tires, and all other fees associated with “taking your car in.”
  • Insurance – Of course, your car must be insured to be street legal. These costs vary widely based on your personal characteristics, driving history, and type of vehicle owned.
  • Tags and taxes – These costs include fees for your car title, registration, and any other state or local taxes that may be applied.
  • Depreciation – Unfortunately, your car loses value the longer you own it. Certain vehicles are more resistant to depreciation than others, which may be a factor worth considering before purchasing a new one. Consumer Reports estimates that depreciation makes up 48 percent of the total cost of ownership over a five year period.
  • Gas – Yes, gas isn’t cheap and takes a big chunk out of our wallets each month.


Is it worth it?

The final answer is up to you: How much extra income do you have? Do you need a vehicle for work? Particularly for households with multiple vehicles, car ownership costs add up fast and can be an unnecessary source of financial stress for your home. If your budget is strained, weigh the pros and cons of selling off a vehicle and making do with a smaller fleet. You might be surprised at how much money you save.







Photo Credit: user  trumzz


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