should we be concerned about depreciation?

[Juzam Djinn]

guys ive been having problems wanting a car and when i have dat car m afraid of depreciation that even if its set up i wouldnt be able to sell it at the price that i got it. even if its less than a hunred thousand its ok. what is the remedy or this? what is the truth about depreciation?

[alwayz_yummy]

what is the remedy or this?

simple:

get a TIME DEPOSIT OR T-BILLS! bumili ka ng prime location na condo or lot!

what is the truth about depreciation?

siyempre ginagamit kaya kaya nagdedepreciate. simple economics!

[Alpha_One]

siyempre ginagamit kaya kaya nagdedepreciate. simple economics!

A better explanation would be that people don't want a used car as much as they want a new one. If people don't want something, demand drops, ceteris paribus, and the value drops too.

A car's actually a pretty bad investment. Don't expect much on the value of the car, unless it's a classic or a fad car if you're in the States (New Beetle, New Mini, Toyota Prius et al). Returns on investments on vehicles (machines in general actually) come from their output/productivity, and not the market value of the thing itself.

[OTEP]

If you don't like depreciation, buy a used car. You can sell it the next day for even a higher price (if you're a good salesman).

I was asking my dad a few months ago if my commander's brother should buy a W123 Mercedes being sold to him for Php135k. Not having seen the vehicle, my dad just said buy it and if it's no good, just sell it for Php155k in a month or two.

Loan problems hampered the purchase. The Benz was eventually sold by the seller at Php155k (his asking price).

Cars make lousy investments. Either you buy a used one or maintain it very well (long service life) so you don't get hit by depreciation so much.

About the only vehicles that don't change prices in the local market are Land Cruisers and Land Rovers. A '97 Land Cruiser 80 is still doing Php1M on the market today. A '97 Land Rover Defender is around that price also.

[Chip]

agree with all the above. if you dont like depreciation, get a used car. The first owner takes majority of the brunt with depreciation.

now ask yourself, why do you want the car?

If its something to get you from point A to point B, then buy the cheapest yet still well maintained car out there. take into account total cost of ownership. baka nga cheap yung car pero parts are hella expensive plus malakas pa sa gas.

If the car is something you really fancy, like an old classic that you don't see yourself letting go of in the near future, then go for it. passion will beat depreciation hehe

If you are looking for an investment, forget it. Nobody can predict which cars will hold their value over time. Forget all the sales talk people say about cars being an investment, they are not. They are a liability.

[theveed]

A car is an expense, not an investment.

As with any expense, you shouldn't be fussing about depreciation, only resale value.

Like what Chip said, unless you're getting an exotic or rare vehicle, cars are just utilities, technically.

[reniram]

If the car is something you really fancy, like an old classic that you don't see yourself letting go of in the near future, then go for it. passion will beat depreciation hehe

If you are looking for an investment, forget it. Nobody can predict which cars will hold their value over time. Forget all the sales talk people say about cars being an investment, they are not. They are a liability.

I like this! This is one good comment.... Nice statement dude.

[badkuk]

the sad truth is, di ka pa nakakasakay sa bagong bili mong kotse, nagdedepreciate na yan B) not really sure if there's anything you can do about it, that's the nature of things. kaya ako, ilang taon na akong atat na atat bumili ng kotse, kahit used, di ako makabili. why? kasi kuripot, este, wise ako sa money ko B)


pwera na lang siguro kung collector's item ung nabili mong kotse, look somewhere else to preserve/increase the value of your money(property, investments, etc.)

[alwayz_yummy]

sorry kung harsh post ko.. pero un ang simple truth nun.

ako, may 400K dito, binigay sa akin para pambili ng spacegear...pero eto, naka time-deposit pera para kumita muna, at baka gamitin ko nalang sa business... may liteace pa naman ako,e..

[n2knee]

guys ive been having problems wanting a car and when i have dat car m afraid of depreciation that even if its set up i wouldnt be able to sell it at the price that i got it. even if its less than a hunred thousand its ok. what is the remedy or this? what is the truth about depreciation?

like everyone says, a car is not a good investment. with the exception of classic cars don't expect it to hold its value in the long term. brand new cars have the highest depreciation rates in the first two years, so if you are concrened about depreciation buy a slightly used one. now if you are using your car for business is another matter. in this scenario you can either make a profit or a loss when the time comes to dispose the car.

someone had mentioned that the usage (mileage or km) dictates the value of the car. that is true. and it is also true that the demand dictates the value of the vehicle. it is called the law of supply and demand. one good example about this is the MKIV Supra. a ten year old supra in good condition still commands top dollar. it was $50k brand new. 1994-1998 TT Supra (stock and unmolested) in good condition is still worth $35k to $45 today. even though the insurance companies tend to disagree (it is 50% lesser in their appraisal software), there are still people who are willing to pay top dollar for a car such as the TT Supra, because it is rare.

finally, and i'd like to emphasize this one. any car is only worth what someone is willing to pay for it, so use the car value guides on the internet or book as reference only, but those are not absolute values. if someone is willing to pay more for a car, which has a lesser market value per the various reference guides then the amount of money exchanged is the true value of the vehicle.

[slamtaz]

finally, and i'd like to emphasize this one. any car is only worth what someone is willing to pay for it, so use the car value guides on the internet or book as reference only, but those are not absolute values. if someone is willing to pay more for a car, which has a lesser market value per the various reference guides then the amount of money exchanged is the true value of the vehicle.

sir n2knee, that's so very true... this i believe is what we call "FMV" Fair Market Value, a value by which the buyer and the seller agrees to do business based on reasonable disclosure and without any sort of undue influence..

[n2knee]

OT,
kapatid slamtaz, reading your posts in this thread and your use of some accounting terms gives me the impression that you have a background in business (finance/accounting/economics). you have made good posts about the topic.

[ian_rex]

i agree with all the posts in this thread.

to the thread starter, you don't have to worry about the depreciation. by the way, what are you getting, a brand-new or a used one? one thing i saw is that
a brand-new vehicle depreciates a) 25% of its value once you driven it out of the dealership b) the vehicle will depreciate for about 5% yearly until it reaches its 3rd year of ownership c) the value of your car would have depreciated 60% of its actual cost of acquisition regardless of its age.

of course, appearance and condition would contribute greatly on the resale value. but considering the your car is well-kept until such time you decide to sell it, chances are your car will fetch a very reasonable price.

i doubt it though. i figure that, if your car has served you well- it will be very hard for you to sell it (perhaps, im a sentimental person).

[WiRK]

There is no way out of depreciation. PC, laptop, guns, toys, apparels, tennis racquets, gas range, microwave oven... almost everything in this world. The moment you acquire it, it depreciates immediately. Ang binata at dalaga nga pag tumanda, nag dedepreciate na ang value sasakyan pa. He he he...

[oldblue]

There is no way out of depreciation. PC, laptop, guns, toys, apparels, tennis racquets, gas range, microwave oven... almost everything in this world. The moment you acquire it, it depreciates immediately. Ang binata at dalaga nga pag tumanda, nag dedepreciate na ang value sasakyan pa. He he he...

there is a way out of depreciation. kung puro monetary computations wala talaga, luge hehehe. that's the problem if a person is to MBA-ish. compute compute, gross-expense = net, original value-fair market value = net and all that stuff.

in fact, if all people in the world compute like this, then dapat lang alam ng lahat ang monetary net worth ng buong mundo. that is not the case d'ba? who really knows how much money is flowing around, greater than trillions? maybe ... but who really knows? from our caveman days to what we have achieved ngaun. That alone explains na hindi inevitable ang depreciation. if all things (cars, bldgs, nations) had lost value, as defined by depreciation, then naturally, mauubos/liliit ang halaga ng pera.

pero hindi ganun ang mundo eh, in fact, expanding pa nga hehehe


the thinking of some car owners kasi: they take for granted the use of the car, the hidden benefits that it gives for years and years of usage. kaya ang nangyari, parang luge ang dating. tinitignan lang magkano bili tapos magkano nabenta. and therefore depreciated na, expense na or loss na.

you know what separates a charismatic businessman from a by the book businessman, the former gives value to everything not only money. for example, if a charismatic businessman praises/commends an employee, that is an investment. if a charismatic businessman drives into a golf-course or a business club with a corolla, pajero, fortuner, bmw, that is an investment. bec. that creates an opportunity to make returns.

kahit na hindi ka businessman, you use your car for personal means lang, it still gives value to you as a person. and with that face value, it creates an opportunity for you.

[Jun aka Pekto]

If I replaced my cars every few years, I'd be concerned about depreciation. But, I tend to keep my cars until they quit running. So depreciation isn't a big concern.

Take our 1995 Ford Contour SE (V6). Supposedly, it's a lemon. But ours have been relatively problem-free even though it's past its 12th year.

It's been paid off since 1999. Do I really want to replace a car that's old but running fine, no costs except for regular maintenance/insurance, and lower yearly registration fees with a newer flashier one that would cost me ~$500/mo for 4-5 years plus higher insurance and registration costs?

Maybe if I was still single and renting an apartment. But, I have a family to feed and a house (which is an investment itself) to pay for. Besides, I'd be lucky to get $500 for the Contour as a trade in. I think it's a wiser option to get maximum use out of the Contour even though the urge to get a new car is very high. I suppose I could also consider every additional month we keep the Contour is ~$500 saved in new car payments.

My 2 cents....

[flakez]

kung worry mo ung depreciation, benta mo na lang kagad. parang buy n sell, bili-gamit-benta. kasi ako pag bumili ako ng isang bagay for keeps talaga o di kaya naman bebenta ko pag talagang luma na, ung tipong na sulit mo na.

[ptk675]

even a new car can lose upto 20% of its value the moment it leaves the dealer's lot. no way around it, cars will always depreciate. there are those exceptions like the exotic cars but heck, even if you buy a ferrari you cant expect to sell it at the price you got it unless its one of those collectibles that you keep in the garage for 10+ years before selling.

personally, if you plan to own the car for more than 5 years then depreciation is not a factor anymore. even if you keep the amount you paid for the car in cash, over 5 years you still lose to inflation.

[taptap]

guys ive been having problems wanting a car and when i have dat car m afraid of depreciation that even if its set up i wouldnt be able to sell it at the price that i got it. even if its less than a hunred thousand its ok. what is the remedy or this? what is the truth about depreciation?

Depreciation can work into your advantage depending on the how you earn your income...if you dont have any business, acquiring a car either new or
2nd hand would mean that its a liability (an expense) on your side....

If you are have a business practice in (any form such as "professional", corporation, sole proprietorship, etc) acquiring a car (either new or 2nd hand) means it is an investment (or asset) on which depreciation can be applied and use into your advantage during the declared life span of the car.

Like in my case (im in a professional practice), I acquired a 2nd hand car for 180K (with life span of 3 years) in my balance sheet. So for 3 years, i can use the depreciation amount of around 60K every year as legitimate expense against my income tax...after 3 years, i can sell the car even for 50K and it will be considered as income since the depreciation value was used as legitinate expense for 3 years.