Car value depreciation is real, but I find the concept overblown. Most people don’t buy 3000$ computers and go, damn, the resale value on this computer loses half its value when I turn it on. It’s implied that you are buying this as a tool, either for fun or for work, and you are going to use that tool until it no longer works, upgrading it along the way when appropriate.
Cars tend to be more expensive than computers. I think because you can sell a used car for thousands of dollars it technically is an asset. Anything with real value is one. Since I got a car to drive Uber, the cost of value depreciation has come up in conversation. Since a higher odometer reading lowers the value of the car, driving the car will make it “worth less”.
This is true, but I think it’s a weird way to look at a car. Or at least treating a car like a traditional investment is a weird way to extract the total value derived. It’s not like you got a car simply to sell it again one day. You bought a car to drive it.
Trying to figure out how much I get paid with Uber
I got my car to drive Uber. As the conversation of pay arises, the question of car depreciation kicks in. In some people’s equations, the value depreciation is taken into consideration. In my equation I see it as a moot point.
I previously did not have a car, now I do. This car makes me money. Here is a list of things I do think matter when thinking about how much money you actually net:
Taxes (Uber pays you without dealing with taxes)
Car loan
Insurance
Gas
Fluids and other regular car stuff
Cleaning product
Repairs and maintenance
It’s worth noting I use my car almost 90% for work so pretty much the entire loan and gas so far is tax deductible.
I do not sit there and go, well my car is going to lose 15K in value before I’m done with it. I think that’s silly math. In order to use the car as a vehicle. The car loan (divided into bi-weekly payments) is just part of the cost of doing business.
I personally include the entire car loan, despite using 10% for pleasure. In my math equation I don’t count the value of the car as something to flip. I will just write it off entirely. In the end I may sell it, I may not. It could end up getting totalled in 4 years. That isn’t worth tracking now.
Maybe there’s some expert finance math that says I should care more about car value. I don’t. In the end I will make more off this car than what I spend, unless some really bad stuff happens before the 4-5 year marker.
Still it’s worth noting that when you DO get paid by Uber. You should subtract about 5$ an hour for expenses and then subtract like 30-35% for taxes to be safe. It’s way less glorious after the fact. It’s still enough to pay my car note and all other expenses.
I will say if you own the car in full, just ignore the value in your equations. I need to add my loan until it’s paid off. Once the car is owned, the ROI is better for money made with it.
The value added by owning a car
Let’s be honest, owning a car gives you a lot of freedom. Your ability to travel expands and you’ve already frontloaded most of the cost. Renting a car without insurance sucks. Buses and trains don’t give you a lot of control over your time. Public transit in a new city can be a nightmare.
Owning a car lets you make moves. There were two really cool jobs I applied to last year I would have been great at. Both required a car. Both based on their locations, which were inaccessible by public transit. We’re talking almost 2 hours each way for one of the places.
When you are single, or in a relationship, a car is a great way to flex. It gives you a private space to have intimate moments while still getting things done. Chatting on the bus isn’t the same as vibing out in a car. When you have kids, I hear owning a car makes life simpler.
A car is a luxury experience. It’s a tool that is used for comfort. In the same way automatic tools make changing a tire take 2 minutes, and manual tools make it take 20, having a car impacts your life drastically. You can reframe your entire schedule to be built around your needs, without caring about other people’s schedules. Depending on who you are, this is worth a lot of money.
Since the tool of a car plays such a pivotal role in time saving, and in some cases literal savings (think special hopping at the grocery store or Costco), there is a lot to be considered when talking about the ROI.
The main point I’m making is you shouldn’t get a car and fret resale value. You should get a car expecting to lose everything you put into it. The only way to recoup is to use the car to make money. To me, that’s the best way to think about it. With two exceptions of course.
Toyotas/Hondas and excessively rare cars
My buddy owns a late 2010’s Toyota. It’s literally worth more now than when he paid for it. For whatever reason Toyota and Honda have done a wonderful job of making cars that last. The models right before the “electric components ruled everything around me” models proved to last longer than some of their technological counterparts.
With that caveat out of the way, most cars don’t really go up in value. You should be able to flip your car for at least a couple of grand, even if you treat it poorly. So down the line, there should be a gift waiting for you when you do trade your car in for the next one, or however you manage it. I just wouldn’t treat that like a given when talking about using a car for work.
The other exception worth mentioning is stupidly rare cars. Limited model runs of Bugattis or whatever stuff the ultra rich can own. Having a car a famous person once owned could absolutely turn a tool into an asset. I don’t think every single super luxury car will count, but a whole bunch of them are collectors items.That being said, I think million dollar plus cars are a lot different than 25’000$ Sedans.
I would love to know what you think about this one. I’m always trying to figure out the right way to see things. Whenever the car talk comes up people look at car value differently than I do. Maybe that’s a mistake. In my version you get delighted and in the other version you worry about every KM. I could not care less, I’m going to use my car as much as I can.
Live Long and Prosper Everyone