How to Make Buying a Car into a Good Investment

As we know, a car purchase is big. In fact, it may be the second-most expensive purchase that you make after your home. A lot of people consider a car an investment because of its price. But experts say that a car is not actually an investment. When you make an investment, you assume that the money you put in that item or asset will generate an income or appreciate in value in the future. In other words, an investment makes you money. Typical examples of investments are a home because it appreciates in value overtime; stocks because they pay dividend and also appreciate in value; and retirement plans, such as self-managed super fund and annuities, because they allow you to grow your money tax-free. Cars depreciate in value over time, so financial experts don’t consider them an investment.

car investment

However, owning a car is something that most of us hope to experience, well at least even once in our lifetime. And isn’t it a bad feeling to know that that one thing you ever dream of having is not actually worth buying? Fret not. In this post, we will provide you some helpful tips on how to ensure that your next car purchase will be the best investment you make.

Do your research

This is the first and foremost thing you should do before buying a car. You can start by looking at some buying guides on the internet. You can also go to your local library and dig through their car buying guides to get much information about the models and features of the cars you’re considering. If you have friends who know a lot about vehicles, you can also ask them for some advice. Do your homework and research as much as you can. It’s tens of thousands of dollars we’re talking about here, so it’s very important to ensure that you get the best out of your money. If you head to the dealership without getting well-informed, you’re going to end up with a poor selection.

Purchase a used car

According to Edmunds.com, a new car loses its 11 percent value the minute it rolls out of the dealership. In the first year, about 15 percent of its value is lost, with another 15-25 percent lost each year thereafter. A good rule of thumb if you’re looking for a vehicle is to buy a car that is at least 2-4 years old. That car will still be relatively new, and the great thing is you don’t lose your investment dollars because the first owner has eaten the larger portion of the depreciation. If you’re done with the car and would like to purchase a new one, you can sell it for near the purchase price.

Pay in cash

The next thing to consider is when you buy, pay it in cash. Paying cash can benefit you financially in a lot of different ways. First, you no longer need to pay for interest. As we all know, when you loan, you’re automatically charge with finance charges and interest. Second, it gives you total ownership of your car, so that means you have full control of it. If you have a loan and you fall on difficult financial times, the bank or whoever you owe money to can take the car from you if you fail to make payments. But if you own it already, you no longer have to worry about monthly payments. And the best thing is you have the option to sell it in case you need some cash. And of course, paying in cash also means eliminating the hassle of dealing with annoying lenders.

Take care of your car

Once you own the car, keep it clean all the time. This will certainly keep your car looking newer for longer amount of time. Better if you also learn the basics on how to maintain it, including airing up car tires, changing oil, changing air filter, and changing transmission fluid. Not only will this keep your car in good shape, but it will also save you a lot of money in the long run.