Now if the item is not treasured or enhanced but is used to its max (a 97 toyota never having been washed but probably has its oil changed, tires rotated and sparkplugs replaced) is also a wise investment. Since it belongs to its owner and is used for a valuable purpose.

but- unfortunately, even the junk we buy all the time- the suv that we really dont need, and the big backyard that we dont use enough etc are investments- just poor ones if we dont maximize their potential.

Looking at everything we do as an investment may help us to decide if we ought to be doing it or not. Is it a good investment of my time and energy to yell at the guy who cut me off? it a good investment to watch prime time tv? Is it a good investment to circle the parking lot for the closest space?

A good way to evaluate my choices- thanks!

I know it will go on sale again in the future, but this was a very good sale, and I haven’t seen it for less since.

But as Alex Workman commented earlier in #44, in economics “everything we purchase is considered an investment” because you expect some “future utility” from it.

So just because something doesn’t appreciate in dollar-value in resale, doesn’t mean it’s not a worthwhile purchase. Per the Dollar Rule, so long as you are getting sufficient usage or benefit out of a purchase (say 1 man-hr per buck you spend on it), then that in itself should be one measure of your return on your “investment”, as it were.

So back to the car example, sure most people don’t usually sell their car for more than they paid for it, but you’re getting other benefits (i.e., the “utility”): transportation of stuff, ability to get to work, ability to travel, and so on. Getting your money back (or more) would simply be gravy.

Cars are the same way. You don’t “invest” in a car because you don’t buy it expecting to be able to sell it for more than you paid. But it could be considered capex in the sense that it will allow you to achieve rewards elsewhere.

Anyway, Thank you for this blog !! :)

Houses barely keep up with inflation – 1% to 1.5% is a typical real return in residential real estate over the long haul.

People tend to ignore things like transaction costs and carrying costs (e.g. how many roof replacements) when they talk about how much they “made” on the sale of a home.

Merely subtracting the purchase price from the sale price is not accurate, but that’s how we think.

Borrowing the concept of “utility” from the economic theory of supply and demand, I would like to define my own definition of “investment”:

An investment is a purchase of a good or service with the expectation of future utility.

With this definition, everything we purchase is considered an investment.

The measurement of utility varies from case to case. For example, the measurement of utility for the purchase of financial instruments tends to be in currency ($$$). Likewise, the measurement of utility for designer goods tends to be a measure of “fun factor” (which is quite subjective).

With this definition, it becomes easier to understand a person’s rationale for purchasing a car. For people who value money more than “status”, utility will be measured in currency. Hence those people will tend to buy econimical vehicles.

Trent, I think you nailed it when you said it’s a distinction “between personal investments and financial investments.” A car is a depreciating asset to me, my little piece of crap will never increase in value so I would never consider it an investment.

However, there are a lot of interesting arguments here so I thought it would be fun to pose a question to those of us that have always seen our car as an asset rather than an investment. Other than price appreciation, what would it take for you to see your car as an investment?

For me to see my car as an investment, it would have to last a very VERY long time. I’m driving a 1999 POS because I’m frugal (cheap if you ask my wife). If, ten years from now, it’s still going strong and doesn’t require major repairs every other month… I’d have to cave in and agree with others here that, yes, that car was one hell of an investment. Zero appreciation wouldn’t matter near as much if I were able to forego another 10 years worth of payments and higher insurance.

Odd
http://www.Money-and-Investing.com

BLAAAHHHRGH!

(nice article)

Not true. Take the 2006 Honda Insight that sold for $26K on eBay a week or two ago. MSRP was $20-21K, and the original purchaser probably got it for less, way back in the days of $2/gal gas :-)

And, K (#32) — I also agree with you that just because something goes down in value doesn’t mean its not an investment. Many stocks decrease in value, are they not investments?

Here is a meaningful way to think about this — the relative value of an investment depends on the total cost and the total revenue the investment ears. For a car, the cost includes oil, gas, maintancence, insurance, and depreciation. The revenue includes access to better paying jobs and cheapers stores/services. So a car would be a good investment if, say over ten years, it cost $30,000 but earned $50,000. That would be a $20,000 profit on the investment. It would, in fact, be a better investment than investing $30,000 in stocks that were sold ten years later for $40,000.

Isn’t the important question whether a car is necessary or not?

The word investment has a lot of different connotations. I invest my time into volunteering or surfing the ‘net for hours. I invest my money into a Roth IRA or a new model vehicle. I invest my feelings into relationships.

All of these have potential for complete failure or gain. I think a some of the comments are based this question, “Is a car a GOOD financially SOUND investment?”

Are you saying that stock in Enron wasn’t an investment? That didn’t go up in value.

Do you own a car? Then it must offer you something that the $12k in the bank couldn’t give you.

Trent is just asking people to look at the word investment in terms of non-monetary value.

$X is the amount it would cost to get reliability and the most basic functionality of that transportation. If you live in an area with great transportation, $X might be the cost of a public transport pass. If you live in a rural area where there’s a lot of snow, $X might be the cost of a vehical that can handle that snow.

In my mind, nothing above $x in the price of the vehical should be considered an investment– just a consumable good. It may be worth it to you to get something “nicer” than the basic minimum you need, but I don’t think that automatically makes it an “invstment”.