If you have a couple hundreds of thousands or millions of shillings and want to “invest” them, what would you choose? Would you choose something that will enable you to get a profit, or will you choose something that requires you to spend money on it constantly.
The scenario above shows what an investment should do, and exactly what a personal car does not do. A personal car is an asset and sometimes even a necessity, but should not be confused as an investment. Today, the word investment has become scrambled with overuse.
An investment, as the dictionary defines it, is something that is purchased with money and expected to produce an income or profit. An asset, as the dictionary defines it, is a piece of property that is owned by someone.
A personal car cannot be considered an investment because:
- Despite the fact that it is an asset, it is a quickly depreciating asset. A depreciating asset is one that loses value over time. Wear and tear happens as soon as you drive your personal car from the showroom. Hardly ever does a car that you have to drive around on a daily basis appreciate in value.
- As soon as you drive your personal car you already have to spend money on it. This is due to the cost of insuring the vehicle against any potential damages.
- A personal car also incurs large expenses because of the amount of fuel you have to constantly put in it in order to drive it around.
- The maintenance costs of operating your personal car are also cash intensive. In order to ensure that it runs smoothly and somewhat maintains its value, you have to spend money on servicing the car and other frequent check-ups at your local garage. It is always advisable to purchase a car that is brand new or close to that. This is because the maintenance costs are significantly lower compared to an older car.
Therefore, after considering the points above, the fact is a personal car you need for day to day use, is not a good investment. This should not be confused with business owners who buy and sell cars at a profit or use their cars for commercial use. This is because a car can earn you money but it is still a conditional investment.
A personal car in some cases can be seen as a necessity if your transport requirements are extraordinary, but more often than not, it is a luxury. This is subjective standpoint, and can be debated, but now that you know the facts, you can make the decision for yourself. Good luck!
Further reading:
