It’s generally understood in vehicle ownership that cars begin to lose their value almost as soon as you drive them off the lot. Many cars lose up to 20% of their value in the first year alone.
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The amount of depreciation depends on such details as the make and model, the age and condition, the mileage and so on, but a certain amount is expected.
However, are there circumstances when a car is a good investment? Experts explain 8 times when a car is worth the money you spend on it.
When It Saves You on Transportation Costs
First, a car can be a good investment when it significantly saves you on other transportation costs, according to John Lin, owner of JB Motor Works.
“For instance, if you rely on taxi rides or rental cars for your daily commute or business needs, owning a car can drastically cut down these costs in the long run,” said Lin.
When It’s a Classic Car
Some cars never lose value if you keep them in good shape.
Lin explained, “Investing in a classic or vintage car can be a lucrative concept. Classic cars gain value over time if they are well-maintained and in driving condition.”
For enthusiasts who dabble in this hobby, there’s value in both the car itself and the passion of collecting and restoring these cars.
When You Use it for a Side Hustle
In today’s gig economy, a vehicle can also become an income-generating asset, Lin said. “Think ride share drivers and delivery services-people are literally driving their way toward financial freedom with their own cars.”
Patryk Doornebos, owner and lead author of the automotive blog, Car Triple, echoed this sentiment, stating that not all cars follow a typical depreciation path.
“Classic and vintage cars, like the 1960s Ford Mustang or Porsche 911, often defy this trend due to their historical significance and rarity,” he explained, calling them “mobile pieces of history, appreciating in value over time, sometimes outperforming traditional investments.”
When It Reduces Other Expenses
On a practical level, a car can be a wise investment when it substantially lowers other expenses, Doornebos said. “A fuel-efficient, reliable car can significantly reduce commuting costs, offering financial and lifestyle benefits.”
When There Is Limited Transportation
Doug Jackson, a Certified Financial Planner (CFP) with Tennessee Tax Solution, pointed out that a car can be a good investment when it serves a critical utility in your daily life and helps save on other transportation costs.
“For example, if you live in an area with limited public transportation and having a car significantly reduces commuting time or allows you to access job opportunities that are otherwise hard to reach, the convenience and potential savings can outweigh the typical depreciation,” Jackson said.
Unfortunately, in many parts of the US, a car is not only a good investment, but potentially also a necessity due to lack of effective public transport infrastructure, said Carter Seuthe, CEO of Credit Summit Consolidation.
If you live in an area where your options are pretty much to Uber to work every day or to drive, then buying a car will certainly be more cost-effective.
When The Vehicle is Highly Efficient
Choosing a car with high fuel efficiency and low maintenance costs can contribute to long-term savings, Jackson added.
“If a car requires minimal repairs, has good fuel economy and retains its reliability over the years, it can be viewed as a wise investment, considering the potential cost savings in comparison to other less efficient or more high-maintenance vehicles.”
When Your Job Depends on It
Khwan Hathai, CFP and Certified Financial Therapist (CFT) with Epiphany Financial Therapy advised, “For professionals whose job necessitates travel or the transportation of goods, a vehicle can be crucial in supporting their income-generating activities.”
A car is worth the cost when it’s an essential aspect of your career.
When There’s a Tax Benefit
Using a car for business purposes can also open up opportunities for tax deductions, according to David Bui, general manager with Schmicko Automotive.
“Expenses such as fuel, maintenance, insurance and even depreciation can often be deducted from your taxable income,” he explained.
This can result in significant savings during tax season, effectively reducing the overall cost of owning and operating the vehicle.
Of course, it’s essential to remember that like any investment, owning a car also comes with its own set of costs like maintenance, insurance and so on.
Lin continued, “It’s all about weighing out those costs against the potential return on investment.”
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.