To answer this question, we must first consider what an Investment is and what a Car is. A car can be an investment if deployed to generate an income that will pay for itself and yield a return. To calculate your net worth, subtract your total liabilities from your total assets. Liabilities are the things that draw from your income. Assets are income generators.
Of the two hundred million new and used cars sold globally every year, very few could be deemed investments. Most cars are depreciating liabilities. Investment cars exist, but they are considered an investment because they are scarce and thus have a perceived growth in value.
If you are thinking of making wise investments or buying a car, there are many factors to consider. Let’s look at these in more detail?
Do You Need A Car, Or Mobility?
We all have wants and needs. Do you want a car? Or do you need a car? These are questions that only you can answer with brutal honesty. Take a piece of paper and write down where you have to travel to every day. The most typical answers would be to drive to work or school and home again. How much time would this require, and how far would your daily commute typically be?
What are the alternatives for commuting? The public transport system, taxi network, or mobility providers like Uber may offer you a more convenient and cost-effective solution. You may just be needing mobility and not the hassle of commuting by car.
A car requires more than just the monthly installment to be paid. There are fuel costs, parking fees, toll fees, maintenance, and insurance, and annual licensing fees. If all you need is an urban commute of 2 hours per day, that means that for 22 hours, your car will be parked and essentially be of no value to you.
It is estimated that seventy percent of the world’s population lives in urban areas, and this trend will increase to ninety percent within this century. Urban areas have well-developed public and private transport. Congestion on public roads and the lack of parking in cities are also realities with which to contend.
The future of urban mobility is trending away from individual ownership and towards sophisticated public transport networks and mobility-on-demand services.
If you live in a rural area with no public or private transport solutions, your needs analysis may yield a different solution. The rural communities are predominantly focused on agriculture, mining, or other land-based production activity. This content is owned by moc.sotuaytsur. Your vehicle in this scenario may also be your tool of the trade. If you spend a large portion of your day in your vehicle, traveling for work purposes, a car purchase may make sense.
Your best mobility solution may be a full-maintenance rental of a car or truck to serve your needs best. The vehicle is still not deemed an investment as it may cost you more than what it generates in value. When forced to buy a car, the best deal is often a pre-owned vehicle that has already suffered the depreciation of a new car.
Wise investors state that you make money when you buy, not when you sell. Look for motivated sellers at vehicle auctions or private sellers forced to sell due to financial reasons.
Do You Need To Invest?
Investment is defined as when your assets generate an income for you during their ownership. You may never need to own a car in life, but you must invest. The best time to invest is always the present. All the financial indices and economic data can be very confusing and are not subjects covered at school.
To invest, you need a small surplus of funds. Your expenses must be less than your income. If you are not living within your means, you cannot be an investor. The first investment you can make for free is education. Read the newspaper and subject matter on wealth creation in books and online.
The secret of wealth creation is not difficult yet hard to attain by most people of Earth. The distribution of wealth in the world is one of the most significant risks to the peaceful coexistence on the planet.
Recommended reading for aspirant investors is “The Richest Man In Babylon” by George S. Clason. Based on the parables of Arkad, the richest man in ancient Babylonia was instructed by the king to write a book on how to attain wealth.
Arkad seven rules to successful investing
To become a successful investor, follow the seven rules that Arkad left for us more than 4000 years ago.
- Save some of the money you earn, at least ten percent.
- Control your expenses, live within your income.
- Invest the surplus of your earnings wisely.
- Avoid investments that sound too good to be true.
- Own your home and make it generate an income.
- Ensure your future income through healthy habits.
- Grow your ability to earn by adding to your skills and knowledge.
Looking more closely at these seven rules, we can identify some key investment types. The most important is investing time in your education. Learn from successful investors like Warren Buffet on how they achieved their success.
Secondly, you need to generate or earn an income. Most entrepreneurs start early in life and sell their time and skills as babysitters, getting a paper route, doing chores at home for mom and dad to earn some money. Try and find your passion in what you do?
Live within your means and avoid debt as far as possible. Debt is someone else’s surplus that they are lending out at a healthy interest rate and with the security of the lender’s underlying assets. Banks seldom lose money. Even during the financial crises of 2008, the banks were deemed too necessary to fail and received bailout funding from taxpayers.
Don’t gamble with your hard-earned surplus funds. If the investment promises fantastic returns, know that there are some high risks associated. Get-rich-quick schemes are numerous and based on the ignorance and greed of unsuspecting investors. The seventh wonder of the world is compound interest. Invest your money over a long period in a portfolio with consistent growth. Be patient and bide your time.
We all need a place to call home. Choose your first home wisely, and don’t get carried away about features that will drain your income. A pool in the backyard is very nice to have but likely the most expensive way to swim possible. Instead, convert a room to let out and generate some income to help pay your mortgage back sooner.
Guard against risk by living a healthy lifestyle. You can take out life insurance and guard against the risk of getting ill or dying, or you can invest in your physical and mental health. Spend time recharging your mental state and stay in shape. The only currency required is the discipline of a daily exercise routine and a healthy diet. Invest time in your marriage and nurture this relationship. Divorce can be very costly and ruin your best-laid plans.
At school and university, you are mostly taught a process to acquire and apply knowledge and skills. Many successful entrepreneurs are self-taught. Never stop learning and investigating new aspects of life. Even learning a skill like playing an instrument can stimulate your creativity in other areas of your career.
Investment is essential to attain happiness and success in life. Your returns are not just financial, but most importantly, in living a healthy life in which you can enrich the lives of your loved ones and community.
When Is A Car An Investment?
Following our definition of an investment, the car will have to generate an income that will cover the costs associated with the vehicle. Let’s consider the example of Uber.
Uber offers drivers a business opportunity by providing a platform where people needing transport can request and pay for the service in advance via a cashless transaction on their cell phone. Uber will take a percentage of the ride fee as their reward, and the balance is paid to the vehicle owner.
The car owner has to generate enough income to pay for the driver, monthly repayment, insurance, fuel, and maintenance costs. In this way, the vehicle serves as an income-generating asset. The owner can offset the vehicle’s depreciation against income tax and so recoup some of the cost.
Rental companies like Avis or Budget are built on the investment in their fleet of vehicles the training of customer service and maintenance staff. Knowing when is the best time to dispose of older fleet vehicles and replace them with new cars is part of their know-how.
Collectors and restorers of rare vehicles are also deemed, investors. The bulk of their investment is the time taken to look for and restore their investment cars. They have to buy the vehicle at a low cost and invest some time and money to optimize the market value fully.
The value of rare cars are a perceived value, as they only hold value to those looking to own them for sentimental reasons. These vehicles will grow in value due to their scarcity and desirability.
Warren Buffet, one of the wealthiest men on Earth and an investment genius, is renowned for still driving his old Cadillac CTS to work himself. Many of the world’s wealthiest drive exotic cars, but these are the rewards of their wealth.
You cannot reward yourself with future income. That is called debt. The debt trap is one that many fall into as the offers of low-interest credit cards and loans can be very tempting. Have the discipline to refrain from trying to compete with the Jones’s.
How To Start Investing
Open a simple bank account with low transaction costs but offering a reasonable interest rate. Always be aware of the small percentages charged by financial institutions for their services and advice. These can add up over time and eat away at your surplus funds.
Save at least ten percent of what you earn into this bank account every month. Transfer this money into the savings account first before paying any bills or spending any money. Now budget to meet your needs with the balance of your paycheck. Probably the most challenging thing for most people is to live within their means.
There are so many tempting ways to spend your money. If you want to be an investor, you need to have a budget outlining what you must pay for and what is nice to have. Money for rent, food, and transport is essential. You can get access to the public library for free.
Set aside some money for short-term rewards if your budget allows for it. Healthy habits like taking up running or walking are free and can be most rewarding. Read up on investments. Join an investment club where you can learn the basics using virtual money. Also, look for webinars on investment.
Don’t feel rushed into investing in something you don’t understand. Look at investing in safe, long-term bonds or savings programs. Define your long, medium, and short-term goals and write them down. Track your progress on a chart somewhere at home.
Be patient and consistent and grow your portfolio slowly on a good foundation of knowledge and commitment.
Conclusion:
Half of the wealth on Earth belongs to the top one percent of people. The top ten percent of the world’s wealthy people own eighty-five percent of the total wealth. The bottom ninety percent own the remaining fifteen percent.
Many of the wealthiest people on Earth started life in poverty and have fought for a better life through diligent discipline and prudent investment. Hard work alone is not enough. The discipline of applying Arkad of Babylon’s seven rules to create wealth is the key.
The motor industry will undergo significant changes during the next few decades as humanity pursues a path to redress the impact of climate change. Using more efficient ways to live and lessening our impact on the environment will be the greatest challenge facing us this century. Investment in the future will always be imperative.
If you do decide to buy a car and you are about to pull the trigger on a used model, it’s worth investing just a few dollars to check the VIN number against the vehicle database. An audit with a company like VinAudit (links to VinAudit) will guard against Mileage fraud, Salvage rebuilds, Title washing, Vin cloning, and a ton of other uglies.
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- About the Author
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John Cunningham is an Automotive Technician and writer on Rustyautos.com. He’s been a mechanic for over twenty-five years and has worked for GM, Volvo, Volkswagen, Land Rover, and Jaguar dealerships.
John uses his know-how and experience to write fluff-free articles that help fellow gearheads with all aspects of vehicle ownership, including maintenance, repair, and troubleshooting.