Cars have come a long way since they were first invented, and they continue to evolve every day. Today’s cars are packed with the latest technology, and they’re more efficient than ever before. They also have so many uses, and there’s a car for every function and industry.
For example, cars are explicitly designed for transporting goods, and some are perfect for long-distance travel. Some cars are perfect for the city and cars that are perfect for off-road adventures. However, there is one thing that cars haven’t been known to be good at, and that is as a future investment.
You might have heard that investing in a car is a bad option. But with the right mindset and planning, you can sell the car you’ve purchased today double its price tomorrow. However, before we talk about how you can do that, let’s first try and understand why many financial experts believe that cars are a bad investment option.
Reasons Why Cars Are a Bad Investment
There are many reasons why purchasing a car can be a bad investment on your part. The first reason is because of depreciation.
Depreciation
You might have heard of the word depreciation before. You might have heard it when you’ve purchased your first home. Essentially, depreciation is the loss in value of an asset over time. For cars, depreciation happens the moment you drive it off the lot, making it one of the fastest depreciating assets. As a result, your car technically has little to no resale value by the fifth year you have it in your possession.
Maintenance and Running Costs
Every car needs to be regularly serviced and maintained. This ensures that the car is running smoothly and prevents any unexpected breakdowns. Unfortunately, servicing and maintaining a vehicle can be expensive, especially if you don’t have a warranty.
Warranties
Warranties are like insurance for your car. They cover the cost of repairs if something goes wrong with your vehicle. However, warranties typically only last for a few years, which can be pretty expensive.
Despite these disadvantages, cars can still be a good investment option if you plan ahead. In fact, you might already have a reason why cars aren’t a bad investment at all. Your reason might be if you use a car to its fullest potential, then it’s money well spent. To a certain degree, you’re right. However, as an investment, you should be expecting to get some money out of it. Here are some ways you can do that.
Buy Cars With Collection Value
Some cars are worth more than others. These cars are typically collector’s items, and they can be pretty expensive. So if you’re going to buy a car as an investment, you should consider buying one of these collector’s items.
Of course, this downside is that not all collector’s items appreciate. Some of them might even depreciate. Therefore, you must do your research before purchasing any collector’s item.
Don’t Buy Luxury Cars
People think luxury cars are a great investment option because they will always want them. Although this is true to some extent, there’s something that will drain your finances while you have a luxury car in your possession: luxury tax.
The luxury tax is a tax that’s placed on luxury items, and it’s designed to make them more expensive. This is to discourage people from buying items deemed non-essential or super luxurious. The luxury tax can be as high as 100% in some countries. This means that if you’re going to buy a luxury car, you should expect to pay twice the price of the car.
Flip Cars
Flipping cars is the process of buying a car, fixing it up, and then selling it for a profit. This can be a good investment option if you know what you’re doing, but it’s also a risky venture.
The strategy for flipping cars is to find those that require very little maintenance care and have low mileage. Essentially, you’re looking for a vehicle that has 24,000 kilometers per year in mileage. If you’re purchasing a five-year-old car then it should only have 120,000 kilometers on it. When you do find a car like this, make sure to fix any cosmetic damages and upgrade the engine and other features. You want to increase the value of the car as much as possible before you sell it.
Flipping a car like this can ensure that you don’t have to spend too much fixing internal damages. Instead, you can concentrate more on the cosmetic side of things like glass replacement and a new paint job. It’s the cosmetics that will drive in the revenue for this kind of investment.
Lease Cars
Leasing cars is a great way to get the newest car on the market without having to worry about depreciation or maintenance costs. You have to make sure that you can afford the monthly payments.
Leasing a car is basically like renting a car. You make monthly payments to the leasing company, and they allow you to drive their car for a certain amount of time. At the end of the lease, you can either return the car or purchase it outright.
If you’re going to lease a car, then you should only do it for cars that have low depreciation rates. This way, you don’t have to worry about the value of the car depreciating too much while you’re still making payments on it.
Cars can be a good investment option if you know what you’re doing. With the right mindset and planning, you can sell the car you’ve purchased today double its price tomorrow. Just make sure to avoid buying luxury cars and flipping cars for a profit. Instead, lease a car that has a low depreciation rate.
