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Can Buying a Car Be a Good Investment?

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Car stacked on top of rolls of cash

It would be understandable if you were to think that one of the biggest purchases you as a consumer will make, should be considered an investment. However, in my experience, it’s been quite the opposite. Cars have the potential to drain your wallet more than any other personal possession you may own.

Buying a car as an investment may not be the most ideal investment strategy. Your car loses 11% percent of its value the moment you drive the car off the lot and will lose up to 60% of its value within five years. Then there are the ongoing expenses which include monthly payments, insurance, registration, warranties, maintenance, and repairs.

Owning a vehicle in most cities can be an absolute necessity especially if you are in a city like mine – Atlanta. We Atlantians quite possibly drive more in a day than most people drive in a week! One hour commute each way is basically the norm here. If you happen to be on the road late at night, you’ll still see tons of cars on the road.

Cost of Ownership

When you compare it to other modes of investments, a car shows its true colors as a necessary liability instead of an investment. Stocks can yield dividends, and real estate can provide monthly rent but a car does the opposite by emptying the pockets. The reason being is that there are quite a few expenses to consider.

The initial purchase cost of the vehicle is just the beginning. If you buy from a dealership, auction, or from any licensed broker, there are usually fees involved. This runs anywhere from $300-$500. Then there’s the cost of registration which is $20 for the tag. Sales tax can be anywhere from 5-9% of the car’s retail value.

Insurance is entirely dependent on your driving history. The number of years you’ve been driving combined with any prior citations including vehicle accidents. If your record is perfect, it can be as cheap as $40/mo. on the low end for basic coverage.

If you’ve been in an accident especially one that was your fault, insurance companies can quickly increase your premium. It’s not unheard of for people to pay north of $160 for a single car.

Then there are the warranties and maintenance. If you’ve paid the extra amount annually which is usually $350-700, you’ll be covered should anything mechanical go wrong within that time. However, if you don’t have any kind of warranty, it can cost anywhere from $600-6,900 annually for maintenance.

Expect anything and everything to go wrong. That’s just the stoic in me speaking but in my experience, it helps when it comes to surprise repairs. Wheel bearings, worn-out tires, engine sensors, check engine light, we all just wish those issues won’t come knocking on our door every year but alas, car issues seemingly all occur at the same time.

While all this is happening, our precious cars are depreciating at a steady rate and more rapidly for the cars that have a higher amount of manufacturer recalls and design flaws. Welcome to the cost of car ownership.

Car broken down on the side of the road

Own The Car vs. Car Owns You

The aim of my blog is to help readers avoid pitfalls when it comes to owning a vehicle. Most of the headaches can be avoided simply by choosing the best vehicle for you in the first place.

It’s estimated that Americans owe over $1 trillion dollars in auto loans. With so many opportunities of finding a good vehicle for the money, it’s never been easier to find the right vehicle at a fantastic price, if you’re willing to search.

Check out my recommended page and scroll down to the website, ‘auto-tempest.’ It’s my favorite way to search for a car on all the search engines at the same time.

If your goal is to have a good-looking vehicle that simply gets you from point A to point B, then I wouldn’t recommend spending more than $5,000-10,000 on a car. If you have your eye set on a particularly expensive car for emotional reasons, just keep in mind that it shouldn’t cost more than 3-6 months of your annual salary.

I know there’s good debt vs bad debt, but in all my years of experience, cars are the epitome of bad debt. Try to avoid it if at all possible, if you absolutely have to, make sure you’re getting a fantastic deal and negotiate a good percentage rate on your APR%. Your credit score will play a significant role in the type of loan you can get.

Parking lot full of cars dealership

Avoiding The Money Pit

Purchasing a vehicle is a nuanced thing. Spend too little on a fixer-upper, and you can potentially end up spending too much on repairs and required maintenance just to get it roadworthy again. Sometimes the cheapest car purchases will end up costing more than what you could’ve bought it used in good condition.

On the other side of the spectrum, you can spend too much money and overpay not only through the initial cost but what it’ll cost you in terms of your personal finances. On the plus side, you know you have a solid car that’s been inspected and approved for sale.

If you know what to look out for or have a mechanic that you trust, it’s important to stay on top of maintenance in order to avoid huge costs later down the road, I cannot stress this enough. Here are a few things to look out for:

  • Manufacturer defects – Sometimes these can be under warranty or factory recall. Conduct a quick search for the most common defects or issues of your particular year, make and model so that you can fully expect what will need to be serviced later down the road.
  • Change oil 3,000-5,000 for conventional, 7,000-10,000 for synthetic. Make sure you check your oil levels even in between oil changes in case your engine is eating oil. Too much and the gaskets can rupture, too little and the engine can get damaged. I recommend checking oil levels at least once a month. It doesn’t take more than a minute.
  • Change transmission fluid every 30,000-50,000 miles. The transmission kit usually comes with a new gasket, filter, and drain plug. If you’re not sure if it has ever been done, please be very cautious especially if you have more than 75,000 miles. Check the maintenance records. If it’s over 100,000 you may need to do a drain (less risk) instead of a flush which completely replaces all the fluids. There is a risk that if you change it too late, it can speed up the transmission failure and end up costing you more.
  • Check power steering and brake fluids. If it’s less pinkish and more black, you might need to get that serviced soon.
  • Check engine coolant (when the vehicle is cooled down) for any oil residue and the levels. If you notice viscosity or thickness, that might indicate the oil and coolant is mixing which means a serious engine problem.
  • Check the tire tread and make sure you have a spare and a jack. Potholes, nails, and other debris can certainly cause you an inconvenience.
  • Replace the cabin air filter every 15,000-30,000 miles. This keeps your cabin smelling fresh and ensures optimum airflow to avoid costly fan blower motor repairs.
  • If you have any diagnostic lights on, get them scanned right away. Avoiding or postponing the diagnosis can end up costing you much more. Here are my favorite scan tools.

I’ve personally had too many cars to count over the years. On some of my cars, I could go months without really thinking about any kind of maintenance. On other cars, it was one issue after another. No matter what kind of car it was, the cost of ownership was always something I knew had the potential to drain my savings.

Whether you’re a car enthusiast or just a fellow driver, if you own a vehicle, it’ll either take your money slowly or in huge chunks. There are far too many people with auto loans, but on top of that, many people also go into credit card debt to pay for necessary and oftentimes, unexpected car repairs.


Cars have allowed us to get to places faster than ever before with greater ease and safety. If you live in an urban area, it’s always worth seeing if there’s public transport available. If you absolutely must buy a car, keep in mind what it’ll cost you to own the vehicle over a certain amount of time. A car is not an investment but rather, a necessary liability that allows us to get from one point to another.

Do you think cars are an investment or a necessary liability?

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Ernest Martynyuk

An automotive enthusiast who's been tinkering with vehicles since I was 15-years old. Repairing automotive electronics has been my main job for over a decade now and have a passion for everything technical regarding cars.

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