America is very much a car-loving country, and the stats exist to back this up. According to the Pew Research Center, only 1 in 10 Americans ‘rarely’ or ‘never drive’ a car. They highlighted U.S. census data, which also showed that 78% of people aged 16 and older who went to work drove their own car, truck, or van.
Get into a crash? You can get lucky with low paint and collision repair costs, but it could also be much worse and expensive. However, this is just one aspect of why financial experts keep sounding the alarm whenever someone buys a new car.
To them, vehicles represent one of the fastest and most silent ways people lose wealth without realizing it. If you, too, feel a little hesitant before dropping a big down payment, maybe read this article till the end first.
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Understand How Fast Your Car Will Lose Value
Financial advisors often point to depreciation as the clearest example of why cars are such poor investments. Popular financial guru Dave Ramsey explains in simple terms just how bad the car depreciation can be. If you were to buy a $40,000 car, you should expect to see it lose over $24,000 within five years. Even on the first day, when your car leaves the dealer’s lot and gets on the road, it loses $10,000, according to Ramsey.
That instant loss shocks many people because ownership feels like gaining something permanent, but financially, it’s the opposite. Many people see their cars as assets when they function more like short-term conveniences. The pride of ownership can blur financial judgment, creating an illusion that the purchase was an investment, when in reality, it’s a slow and steady loss disguised as progress.
The Real Cost of Keeping Your Car Running
Buying the car is only the beginning. The real financial strain begins once you try to maintain it. Insights from Consumer Affairs show that repair and maintenance costs have been rising steadily in recent years. To be specific, since 2020, maintenance and repair costs have been consistently increasing, and between 2022 and 2024, repair costs jumped by almost 25%.
One factor behind this is the increase in the number of electronics and tech inside cars. Mechanics now deal with vehicles that rely heavily on sensors, advanced electronics, and complex computer systems. A simple issue that once cost $150 to fix can now require specialized diagnostic tools and labor that easily triple that amount.
Even if it’s more traditional repairs, the typical method to save was to use non-official parts that did the job just as well. Naturally, this comes with its own risks as well. Denver Auto Body explains that using OEM parts is also important for your safety, and to be aware of insurance companies that want you to use recycled or unsafe parts. This is yet another expense you will have to consider
It doesn’t happen all at once. You’re looking more at small payments, periodic tune-ups, and sudden repair bills that slowly erode your savings. Thus, what feels like convenience in the short term can easily become one of the biggest recurring expenses in a household budget.
Car Ownership is Great at Manipulating Financial Logic
Even with all this information, people still line up to buy new models every year. This isn’t because they’ve ignored financial advice; it’s because cars speak to something deeper than logic. For many, a car is identity, achievement, or even a measure of success. It’s one of the few purchases that offers an emotional payoff every time you start the engine.
Culture plays a huge part in this attachment. From advertising that links cars to freedom and adventure to social pressure that connects vehicle quality to personal worth, the decision to buy is rarely a cold calculation. People convince themselves that a new car is a “need,” even when a practical used one would do the same job.
Countless individuals are realizing that they don’t have to follow the social programming of getting a car the moment they’re able to. One article by Vox highlights Christian Kurpiel-Wakamiya, a man without a car in State College, PA. Despite being a small town, a trip to the grocery store is 17 miles. How does he manage? An e-cargo bike. Today, his 13-year-old son also bikes and racks up over 19 miles every day.
It’s certainly possible to live without a car if you’re willing to try other options. The question is, do you want to give up on the joy of driving your own car? Some people love cars so much that depreciation is not the slightest issue for them. It’s all relative after all.
Frequently Asked Questions
1. Is a car a current asset or not?
A car isn’t considered a current asset because it can’t easily be turned into cash within a year. It’s actually a fixed asset since it’s something you own and use long-term, though it still loses value over time through depreciation.
2. What is the depreciation rate for a car?
Most cars lose around 15% to 25% of their value every year, depending on the make and model. In five years, the price of a new car can drop by about 60% or more. Luxury and tech-heavy cars usually depreciate faster than practical, fuel-efficient ones.
3. Is a car included in net worth?
Yes, your car counts as part of your net worth, but only its current market value and not what you paid for it. You’d subtract any remaining car loan balance from that number to see how much the car actually contributes to your total worth.
Ultimately, financial gurus aren’t trying to shame anyone out of owning a car. Rather, they’re trying to point out that they can be a big liability when it comes to your financial well-being. No one denies that cars can be a beautiful asset to enjoy, but you never want to forget the financial implications.
