Why is car a horrible asset class?

If you've been following my monthly net worth updates, you'll know that I don't include my car as an asset. This is done on purpose to highlight my belief that car is not a wealth building assets. I've also talked in a previous post on what I consider good assets.

To expand on my previous post, car and automobile is not a good asset class. Obviously, most people require some form of transportation to get around for errands and work, but you don't need a shiny luxury brand to fill that need. Therefore, you should not allocate a lot of capital into your car and use that capital on a better asset class.

Many studies have shown that a new car loses 30% of its value in the first year and then lose the rest of its value in seven to ten years. Therefore, the more expensive your car, the bigger the annual depreciation value.  I'll use an analogy from Dave Ramsey, he compares driving a luxury car the same as opening your car window and throwing $100 bills out the window. I mean, if that's your idea to building wealth then I please enlighten me on your secret. Also, wouldn't it feel better to donate some of that money instead? A car is a sink cost item, the depth of this sinkhole is yours to decide.

So should you never buy a luxury brand car? For me, I don't plan on purchasing any luxury brand car till I've reached financial independence. I am not willing to retire later over a car, I prefer retiring early, so I have the freedom to do what I want with my time.

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