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Automobiles; The fastest Depreciating Investments on the Planet

Jan 9, 2008
Youve probably heard that phrase, your car loses value as soon as you drive it off the lot. Well, thats true since car prices are driven by popular demand and used cars are not popular. A good investment is not a compulsive buy but based on sound business information. Cars, though not always, lose their luster after the first few weeks and you quickly realize you could have made a smarter purchase. Here is why cars are not the best investment and how your money can be spent more wisely.

We all have a friend or two with $500 a month car payments and wonder how they do it on their salary. The truth is they really cant afford such a financial burden. Many times this was a compulsive buy or and uneducated decision. Thats ok though since we are all human and make imperfect decisions. The purpose of this article is to point out the bad investment nature of an automobile instead of criticizing others financial decisions.

Would you buy stock with money you did not have? Of course not, not many people would do such a thing. It just doesnt make much humanistic sense to do something like that. Then why do we buy cars with money we do not have? Well, we consider all the practical reasons such as work, school, home, and just transportation in general. This decision makes financial and logical sense to us right. Besides, we have to have reliable transportation right? True, so we sacrifice financial well being for a brand new vehicle thinking its a great investment in our present and future situation.

Lets be conservative here and say you buy a new car with a $300 a month payment. Lets see you drive that car on average 15k miles a year. Lets say you drive 100k within the next 6 to 7 years before you decide its time for a new car. That means you have paid between $21,600 and $25,200 in car payments. Well, most cars at his point, especially American made cars, are not worth much more than a couple grand depending on the condition. This is ok except you could have paid for a used car in the beginning with cash and saved thousands of dollars. Even if you had to buy 2 or 3 used cars during that time you would have saved thousands of dollars.

New cars are nice but could that new car money be going somewhere more financially productive? Yes, the answer is a definite yes. Think about the extra money you could have put towards realestate or the stock market. These are appreciating investments we are talking about here. The whole time you were making payments on your car it was depreciating and you were in actuality losing money you could have been making else where.
About the Author
Scott Johns conducts research and analysis of stock market picks for a penny stock analysis company. To check out Top Penny Stock Picks for some of his company's latest picks.
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