Vehicles are some of the most significant assets you’ll buy, costing in the neighborhood of thousands to tens of thousands of dollars for standard models. If you plan on buying and owning the majority of your vehicles, you should treat those vehicles as an investment—and have a strategy in place to maximize that investment.
Your “return” as a vehicle owner can be counted in multiple ways:
- Functional value. First, there’s the functional value of your vehicle. If it gets you to work every day and makes it possible to run errands, you can consider it a standard vehicle. If it also doubles as a way to make extra money through ridesharing, or if it’s capable of hauling heavy loads, it may have additional value. Unfortunately, these evaluations are somewhat subjective, so it’s hard to pinpoint an exact dollar value to them.
- Ongoing costs. Owning a vehicle is associated with additional costs, beyond what you initially paid for the vehicle. For example, you’ll need to pay for fuel to get where you’re going, and vehicles come with sometimes drastically different levels of fuel efficiency.
- Resale value. The gold standard for ROI is the resale value of your vehicle. This is the amount of money you could get for the car if you sold it at a certain moment in time; the higher the resale value, the more inherently “valuable” your car will remain over time, allowing you to recoup at least some of what you paid for it.
- Life expectancy. You can measure value in life expectancy as well; the longer you have a vehicle and can keep it in good, running condition, the longer you can go without purchasing a new vehicle. In other words, the longer it lasts, the more bang you’ll get for your buck.
- Unexpected occurrences. You should also keep in mind that some vehicles are more prone to unexpected occurrences that could strain your finances. For example, some cars are more vulnerable to theft than others, and motorcycles are more vulnerable to crashes than cars.
How to Maximize Your Investment
So let’s treat buying a vehicle as an investment. What steps can you make to ensure you’re getting the most for that investment?
- Buy used. Buying a new car can make you feel good, and there’s no replacing that new car smell when you drive an untouched car off the lot, but ultimately, new cars are inferior investments. You won’t get many advantages in terms of fewer repairs or less maintenance, but you will see a plummet in the value of your car from the moment you drive it off the lot. In fact, buying used cars can save you up to $15,000 per decade, compared to buying new.
- Know the value of your vehicle. Before buying any vehicle, you should get acquainted with its resale value. Kelley Blue Book is the leading authority on the resale value of cars, and with its database, you can quickly determine which vehicles come with a higher resale value than others. Some makes and models are inherently worth more, over a longer period of time, than others, and some features, like color, can influence the resale value of your vehicle as well.
- Invest in preventative maintenance. Always spend the time and money necessary to keep your car in good order with preventative maintenance, such as oil changes and tire rotations. This will help you spot small problems before they become big problems, and ensure the moving parts in your vehicle aren’t taking more of a beating than necessary. Ultimately, regular maintenance could add years of life to your vehicle.
- Get a good insurance policy. Your vehicle insurance policy occupies a unique niche in your ROI calculations; it’s both an ongoing cost associated with your car, and one that can help you earn a much higher return. Make sure you shop around for the best policy, comparing offers in terms of both price and coverage. Choose a policy that gives you nearly comprehensive protection, so you never have to worry about an accident, and try to get the best possible monthly rate.
- Get legal help after an accident. If you are ever involved in an accident, it pays to get legal help. You may be able to get more compensation than through insurance alone.
Unless it’s a coveted collector’s item, the value of your vehicle is invariably going to decrease over time. But since in many areas of the United States, you need a vehicle to sustain your lifestyle, you might as well take steps to get the most value out of your investment. There are tens of thousands of dollars at stake here, so don’t take your vehicle decisions lightly.