When determining your net worth, creating a list of your assets and liabilities is one of the first steps to calculate where you stand. Property like real estate, bank accounts, and investments are immediately recognizable as assets with monetary value. However, your automobile may be considered both an asset and a liability.
Key Takeaways
- A car is a depreciating asset that loses value over time but can retain some worth.
- Vehicles immediately begin losing value once the owner takes possession.
- The Kelley Blue Book provides trade-in and private party values for your vehicle.
Understanding an Asset
An asset is something that holds monetary value now or in the future. Common personal assets include certificates of deposit (CDs), real estate, jewelry, and investments like life insurance policies and stocks.
When a company’s assets are on a balance sheet, they include current and fixed assets. Current assets are commonly converted to cash within the fiscal year, such as accounts receivable, cash and cash equivalents, and sellable goods or materials. Conversely, fixed assets are tangible items like machinery and buildings or intangibles like patents and licenses.
How Is a Car an Asset?
Your car is considered a consumer product, and consumer products can depreciate. A car is a depreciating asset that loses value over time but retains some worth. Because you can convert a vehicle to cash, it can be defined as an asset. Unlike real estate, savings accounts, and other assets that have the potential to increase in value, automobiles are vulnerable to a range of depreciating factors that can cause values to plummet, such as:
- Odometer miles
- Wear and tear
- Accidents and dents
The average yearly cost of ownership in 2023 to maintain and use a car for 15,000 miles annually is over $10,000. This includes maintenance, insurance costs, and fuel.
Some cars that retain their value or appreciate over time include 1950s American classics and British or German classics like the Aston Martin or Bentley.
Value vs. Depreciation
Depreciation affects your car's overall worth, and knowing the value of your vehicle when planning to sell it is essential. A new vehicle loses 20% of its original value in the first year. A $60,000 car is only worth $48,000 a year later.
If you use your car for business, you may be able to claim your depreciation loss, up to $19,200 if you qualify, when you file your taxes.
The website for the Kelley Blue Book (KBB) uses your vehicle’s year, make, model, amount of mileage, and vehicle identification number (VIN), to provide the trade-in and private party values. All vehicles naturally depreciate over time and with regular use, but some models retain value. According to KBB, Toyota is the value brand that tends to hold its resale value and identified the Toyota Tundra as the model that best retained its value in 2023.
Should Your Net Worth Calculation Include Your Car?
When calculating your net worth, subtract your liabilities from your assets. Since your car is considered a depreciating asset, it should be included in the calculation using its current market value.
Is a Financed Car Still an Asset?
Yes and no. The vehicle is an asset with a cash value if you need to sell it. However, the car loan is a liability, and the loan should be deducted from the car's value.
Can a Car Ever Be Considered an Investment?
Rare and exotic cars may increase in value as the number of road-worthy models decreases.
The Bottom Line
Nearly every vehicle on the road will depreciate over time. Miles driven add to its wear and tear, accidents and dings cause values to decrease. Car owners should continually research their vehicle's value and keep a diligent maintenance schedule to optimize its worth in cash.
FAQs
Your car is considered a consumer product, and consumer products can depreciate. A car is a depreciating asset that loses value over time but retains some worth. Because you can convert a vehicle to cash, it can be defined as an asset.
Is a car a current asset? ›
Although there are different types of vehicles, they all fall in the category of Fixed Assets. In general, assets that are expected to last more than a year are fixed assets. The correct answer is B) Fixed Assets.
What is the best answer to define an asset? ›
An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit. Assets are reported on a company's balance sheet. They're classified as current, fixed, financial, and intangible.
How much is my car worth as an asset? ›
You can find the estimated trade-in value of a car by using an automotive industry-standard pricing guide, such as Kelley Blue Book (KBB) or Edmunds. You'll need to enter your car's year, make, model, mileage, features and current condition.
Is your car part of your net worth? ›
Your net worth is what you own minus what you owe. It's the total value of all your assets—including your house, cars, investments and cash—minus your liabilities (things like credit card debt, student loans, and what you still owe on your mortgage).
What is considered an asset? ›
Assets are things you own that have value. Assets can include things like property, cash, investments, jewelry, art and collectibles. Liabilities are things that are owed, like debts. Liabilities can include things like student loans, auto loans, mortgages and credit card debt.
Is a credit card an asset? ›
If it holds value and could be used to offset your liabilities, it's an asset. Liabilities are debts. Loans, mortgages and credit card balances all fit into this category. Your net worth is calculated by adding up the value of all your assets, then subtracting your total liabilities.
Is a car a tangible asset? ›
Tangible assets include cash, land, equipment, vehicles, and inventory. Tangible assets are depreciated. Depreciation is the process of allocating a tangible asset's cost over the course of its useful life. An asset's useful life is the duration it adds value to your business.
Is a car a good investment? ›
On a practical level, a car can be a wise investment when it substantially lowers other expenses, Doornebos said. “A fuel-efficient, reliable car can significantly reduce commuting costs, offering financial and lifestyle benefits.”
What are the 4 types of assets? ›
Common types of assets include current, non-current, physical, intangible, operating, and non-operating.
It represents a recurring liability that drains cash from you rather than putting cash in your pocket. A home is better characterized as an expense or money pit rather than an asset.
What are the three types of assets? ›
Three of the main types of asset classes are equities, fixed income, and cash and equivalents. For individual investors, these are more commonly referred to as stocks, bonds and cash. An investor's asset allocation, or mix of asset types, is the foundation of portfolio construction.
Is a car I own an asset? ›
In accounting terms, your car is a depreciating asset. This means your vehicle may have value right now and you could sell it. However, while you own the car, that value usually goes down over time.
Is a car a fixed asset? ›
Some common examples of fixed assets include vehicles, buildings, land, furnishings, and machines. When it comes to a fixed asset, accounting procedures are slightly more complex than for current assets.
Is a car an asset or debt in a divorce? ›
No matter how much your car means to you and what you've been through together, unlike children and pets, cars are treated as ordinary property in a California divorce. That means they are subject to the same rules about assets and debts as other property such as your house or your 401k account.
Is a car an asset for a mortgage? ›
Physical assets include anything tangible that you own that's valuable – anything that can be touched. Physical assets that can be sold for funds to be used to qualify for a mortgage include – but are not limited to – properties, homes, cars, boats, RVs, jewelry and artwork.
Is credit card debt an asset? ›
It appears under liabilities on the balance sheet. Credit card debt is a current liability, which means businesses must pay it within a normal operating cycle, (typically less than 12 months).
Is a home an asset? ›
An asset is anything you own that adds financial value, as opposed to a liability, which is money you owe. Examples of personal assets include: Your home. Other property, such as a rental house or commercial property.
