The truth about cars

Civic

Cars.
They’re my thing.
From a very young age, they’ve always been my thing.
The way they look, the way they sound; the telltale nuances in ride and feel and comfort as I drive them.
It’s a long-term love affair, I suppose. And, like any love affair, it’s hard to explain why cars turn me on.
But, they do. They just do.

It’s a troubled romance though.
I’m an accountant, you see.
And therein lies the problem.
Because, as a beancounter I know that cars are a terrible investment.

Think about it.
A car’s value plummets within minutes of signing the sales agreement. And its value keeps on diving right up to the point that you unload the old clunker.
And start the cycle anew by replacing it with a newly-minted, newly-sinking depreciable asset.
And, if that’s not bad enough, the financial setback is made even worse with ongoing costs like maintenance; insurance; interest; parking. And on and on and on.

Fiat500

Ask any beancounter, they’ll tell you; a car’s a lousy investment.
So bad in fact that your worst stock market mistakes can still come out smelling sweeter than those four wheels parked in your driveway.

Take HP for example. HP’s stock price, over the last five years, has been, pretty much, a disaster. Down 46% since 2008.
Pretty bad huh?
But compare that to what an average car sheds in value over the same time, and you might be shocked to learn that, over five years, a car can easily lose 60% of its value.

Here’s the thing. Stock prices fluctuate. So, with stocks, last year’s disaster still stands some chance of transforming itself into this year’s sweetheart.
Cars?
Well, cars simply don’t do that. Car values head in one direction. Down!
That’s depreciation for you. It ain’t pretty.
The only good thing to say about depreciation is that the rate of decline tends to slow down over time. Which is something to keep in mind when choosing your next car (hint: consider buying used).

I know, I know.
You’re thinking, “Hang on a second, you can’t compare a car to the stock market. Cars are utilitarian. They serve an every-day purpose, and thus they can’t be compared to that other vehicle, the one called an investment.”
And to that I’d say, you’re right.
But only part-way right.
Why?
Well, think about this.

Bobcat

A car, most of the time, does exactly what an investment does. It sits there, idle, waiting for you to take it out, have a good time.
The truth is, a car, per the experts, spends at least 95% of its time sitting.
Just sitting; depreciating; parked by the curb.

(Here’s a curious aside: in that 5% that a car actually does get driven, an inordinate amount of that time is spent cruising around looking for a place to park).

Some basic math for you:
Assume it costs $7,500 per annum to run your car. Taking into account a 95% idle factor, every hour you spend (and I mean spend) driving will, therefore, cost you $17.17.
Doesn’t sound like much?
Well, compare that to other assets you use every day. Your computer, for example. If you use yours as often as I do mine, it costs you but a trifle (only 59 cents per hour for my MacBook).
Want to go bigger?
Alright then. Consider your house. With an hourly cost of somewhere between five and eight bucks (and this for an appreciating asset) it’s a relative bargain.

Which, you know, means that your car is the most expensive item you might ever own.

Which also leaves this car loving accountant torn.
Torn between the heady allure of shiny new wheels,
And the sensible-shoes approach of responsible money management.

GTV

And while I’m likely as any gear-head to tune in to the car shows (Top Gear’s my favourite) and while I’ll avidly lap up the latest “best car” pronouncements of the automotive press, what sets me apart from the average car lover is the little voice inside my head that calmly reminds me of the amount of shekels such a desirable object will suck out of my bank account. Each and every month. For as long as I own it.

And it’s that last thought that stops me in my tracks.
Why?
Because—surprise, surprise—I have a tendency to crunch numbers. Which means I can quite accurately predict what almost any four-wheel dreamboat’s going to cost me.

And now I’ve got all this data.
Real life, historical data that itemizes the ownership costs for each of the last five cars I’ve owned.

(If, at this point, you’re thinking accountants are an anal and pedantic bunch, well just be happy you studied law or computer science or whatever—and then go ahead and benefit from my pedantry).

Cooper

So here’s what I’d like to do.
I’d like to share my data with you, put you in the driver’s seat.
And show you how much a string of cars have cost me.
Some of the data, I think, will surprise you. Especially in way they address those age-old questions of: lease or buy? Or old or new?

My hope is you’ll come away with some important information.
That will assist you when it comes time to acquire your next car.

So stay tuned while I prepare that data. Tidy it up, make it more presentable.
Back soon.

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