Cars percentage of net worth?

[Car-Guy]

Well in my mind you are correct. You can't count future cash flow or NPV of that cash flow on something that expires when you do.

I wonder in such a case if both would consider themselves millionaires? I suspect some do and some do not. Suspect their lifestyles "could be" the same too.

 

[Andre1969]

The only time I really thought about a vehicle as part of my net worth was when I bought my 2012 Dodge Ram. Even though I did the math exercise a few posts back with my old Dodge Intrepid, I had never really thought about it at the time.

However, my reasoning for thinking about the Ram, in relation to my net worth, wasn't how much it added to it, but more of a mental exercise, to psyche myself into buying it. At the time, I was really on the fence about it, even though it was a good deal. I started thinking that even if it was $25K, I had enough to buy this truck 30 times over. Or to put it another way, I could have bought the truck, given it away at the end of the year, and bought another, and done that for 30 years before running out of money. Of course, that's not taking into account inflation, market fluctuations, etc.

A dumb exercise that's really meaningless, I know, as I wouldn't give away a truck every year. But, it was just one of those mental mind tricks I used to convince myself that it wasn't much money at all, and that I could easily afford it.

 

[Sojourner]

There's your net worth, then there's the amount that you consider useful for planning your expenditures and budget.

Exactly how I think about it. I never include the value of my cars or household possessions when calculating my investable net worth. What I'm interested in is the number to plug into FIRECalc in order to estimate my SWR.

Cars? They're just a money pit. Old ones cost for repairs and maintenance, new ones cost a lot then depreciate quickly. The value of a new car is that you get a couple years break before spending much on repairs or another new car.

+1

 

[Andre1969]

Cars? They're just a money pit. Old ones cost for repairs and maintenance, new ones cost a lot then depreciate quickly. The value of a new car is that you get a couple years break before spending much on repairs or another new car. "Collectable" cars my be an investment but most people I know who bought, restored, and sold classic cars (whatever that means) did it at either an outright net loss or if they made a paper profit their time, garage space, tools, etc. weren't part of the equation.

I was just thinking this very thing this morning. In another forum, somebody posted a link to a 5,000 mile 1977 Chevette that went for an astounding $21,000. I ran that number though an inflation calculator, and it came out to around $4300-4400 in 1977 dollars.

That Chevette? Its window sticker read roughly $5,000. Base price was only something like $3225, but it had a lot of options for a Chevette. Things we take for granted today, like a radio, a/c, rear window defroster. Back seat

Now granted, there are some classic cars out there that are worth a fortune. And some people are good at "flipping" cars (and not like an old episode of "CHiPs"). But by and large yeah, they're a money pit. I imagine most classic cars never even get back to their original MSRP in value, once you factor in inflation.

 

[freedomatlast]

I never though about the price of a new vehicle in terms of percent of NW.

I have thought about the price of a new vehicle in terms of how many months of after tax earnings would be equivalent.

I've also thought about the prices of new vehicles slowly approaching the price of my first house.

 

[nhcycling]

I don’t think about our cars as being part of our net worth. For that matter I don’t count any “stuff” in net worth although some of it has may be of some value, e.g. my spouse’s woodworking shop and all its machines. I count just accounts that have $, and houses.

 

[Guamaniac]

I estimate my couch to be .00030769 of my net worth.

 

[ProGolferWannabe]

Three cars total = <1%



If I'm doing the math correctly, that's over $78 million net worth. Why are you hanging out with us?

You are. If I had a net worth that large, I might even consider upping my ride.

 

[audreyh1]

I don't consider depreciating or consumable items as part of our NW. That includes our cars, motorcycle, guitars, refrigerator, clothes, food, etc. I do include investments, cash, and house.
Many decades ago all I had was an old car and a stereo. No money. So I guess at that time I would have had a NW of about $500.

Cheers!

Same here, especially as whatever value is remaining as it depreciates is applied towards a newer vehicle. My last one was cheap new and we had it for 17 years! So by the time we sold/traded it in it was worth very very little.

 

[retire48in2018]

One way to think of this, for those of us already FIRE.

It is typical to think safe strategy is only using 4% as withdrawal rate (some argue that 5% is safe, some advocate closer to 3%).

So, another way to view this - would you have a years’ worth (+/-) of “income” in vehicles?

I think that’s too high - as a general statement. Maybe half, at most, of “income”.

I think the best way is to consider total value of vehicles as an annual amount of “income” stream.

For those in early FIRE (no pensions or other income stream) that means no more than 50% of 4% - so at most 2%.

 

[retire48in2018]

And to clarify - 2% max of income stream producing assets - excluding any pensions, etc - as a guideline !

 

[audreyh1]

I don’t even bother with this because I’m retired.

During accumulation phase it probably makes sense to limit how much you spend on a car compared to income and savings, like you do with how much house you can afford.

But if already FIRE and already have the funds - then go for it! If you need to take on a loan, then review how it impacts your annual expenses and if you are still in a safe range no problem!

P.S. I have limited income streams, but that doesn’t limit my spending because I’m a total return investor. Pure % of retirement portfolio value each year.

 

[Koolau]

Adding the nominal price of every car I've ever bought (15 in all) it comes out to about 3% of current NW. Of course, at the time of purchase, it was a much bigger % for some of the cars.

Full disclosure, my first two cars cost $50 each and my next car cost $0, so there's that.

Possibly a more instructive exercise (might be impossible) would be to calculate how much one has spent on cars over the years including price, repairs, tags, insurance, fuel and routine maintenance (think oil and tires, for instance.) Obviously, YMMV.

The 2 current cars add to about half a percent.

 

[RobbieB]

Cars do play a part in your net worth even if you don't count it.

If you have a newer car with a lot of miles left you won't be needing another car for a while. But when you do your net worth is going to take a hit -

 

[kingkarmann]

Interesting question with lots of thoughts.
As others have mentioned, everything you own is technically an asset.
I have a couple of collector cars that are assets.
I don’t include our daily drivers or our motor coach in our net worth.

 

[oiseux]

As others have stated, 5% seems like an useless metric, and one that can vary on a stage of life. Just starting out, I've certain it was over 20%. But now, at 0.3% for two, we would be uncomfortable with 5%.

 

[kgtest]

Depends... are we talking purchase price, or current estimated KBB value? I spent $42k on my 2014 truck, and $30k on our 2022 Camry. As a percentage of our net worth...well I'm not telling that figure, but I am also not FIREd yet, we have 3 little kids and having reliable vehicles that we don't have to spend time and money on while they are busy growing was something important to us.

I also went in half on a 2017 2500HD with my DF, that I use for business (Arborist and Tree Care company I run on the side of my IT consulting).

My wife gets paid mileage, so we sort of figure mileage against the cost of the Camry since it basically pays for her to drive. She drives over 30,000 miles a year, and at the federal mileage rate of 65.5 cents * 30,000 miles that's $19,650 a year in mileage reimbursement. I deduct ~10,000 miles for my businesses S-Corp annually so that will be another $6,550 of "deductions" on our tax return, lowering my taxable income a little. If we didn't have the tax write offs we would probably hang onto our cars longer or buy less expensive cars. I am still debating about buying a $60k SS Camaro. For now its a want, not a need so I am having a tough time justifying it. I could pay cash for it without any issues.

Maintenance is pretty low on these vehicles. 8 Oil Changes a year, haven't filled up fluids on my own vehicles in decades since the Oil Change place does it. Buy car washes at a discount at Black Friday time from local car wash place so I get them covered for like $160/yr. Buy Oil changes for a discount on Black Friday from the local repair shop and I think they cost me like $120 for 6 full synthetic oil changes. I buy Wal-Mart's tire rotation package when we replace our tires which is also fairly cheap. Camry is still under warranty as we come up on 20k miles it will be the last "free" oil change and tire rotation. I usually get about 60k to 65k miles out of our tires before I need to replace them. I've had to replace a couple batteries in the past few years, once on my truck, and once on our 2013 Camry we just sold for the newer 2022 Camry. I bought that Camry for 15k used, and sold it for 7k after putting on 170,000 miles. Only thing we had to replace was the battery in our time owning that car, plus 2 sets of tires and some wiper blades.

IF I buy this SS Camaro, which is still up for debate, I would put some work into it (cam, headers, cat back exhaust, cold air intake and upgraded throttle body) so the 60k car might end up costing me 65k as I will do some of the work myself. Will need to pay someone to weld the exhaust on since I am not great at welding.

Anyways long rant. I have to replace the ac condenser in my truck. It went out last summer and I ordered the parts, but haven't had time to tackle it yet.

 

[Out of Steam]

Less than 3%. It will get close to 5% if I replace my car next year.

 

[freedom2022]

When I asked for loans, the financial institutions considered fully owned cars, part of the NW.
The lawyers did as well.

 

[gayl]

I honestly have no idea as its a necessary depreciating asset. I barely list the monthly expense (insurance, maintenance, gas)

 

[mojavesue]

Hmm. Lets see. 2008 Prius current value 8k. Paid 8k. 1998 Toyota Tacoma 4wd. current value 8k to 10k. paid 7.5k. 1995 Toyota Land Cruiser value 25k paid 11k. 1992 Lincoln Mark VII LSC value 13k paid 11k. 2019 Lexus GX 460 value 38k paid 49k. And last but certainly not least 2017 Mustang Shelby GT350R value 75k and paid 75k. Most of these vehicles are toys but have held value quite well. Last summer we sold our Subaru Crosstrek that we bought new in 2020 for 28k back to the dealer for 32k.

As you can see we have a little bit of a car hobby. But all total its about 3.5 percent of NW. Both of us worked in the automotive industry for over 30 years and can do ALL of our maintenance and repairs.

 

[Koolau]

Hmm. Lets see. 2008 Prius current value 8k. Paid 8k. 1998 Toyota Tacoma 4wd. current value 8k to 10k. paid 7.5k. 1995 Toyota Land Cruiser value 25k paid 11k. 1992 Lincoln Mark VII LSC value 13k paid 11k. 2019 Lexus GX 460 value 38k paid 49k. And last but certainly not least 2017 Mustang Shelby GT350R value 75k and paid 75k. Most of these vehicles are toys but have held value quite well. Last summer we sold our Subaru Crosstrek that we bought new in 2020 for 28k back to the dealer for 32k.

As you can see we have a little bit of a car hobby. But all total its about 3.5 percent of NW. Both of us worked in the automotive industry for over 30 years and can do ALL of our maintenance and repairs.

I always knew there was one person out there who made money on their car collection. Congratulations!

 

[mojavesue]

I always knew there was one person out there who made money on their car collection. Congratulations!

Ha! Havent made anything on them. The hobby cars have done well recently. Our insurance and registration here in NM isnt too bad. And being able to repair them is a huge plus. I guess there's worse things we could be in to!

 

[jkern]

For me, NW is just a number for fun. It's not used for financial planning, cash flow, expenses, or income. I think it would only count at death for estate calculations.

Since our NW number is just for sh*ts and giggles, I usually add $200K for all the personal property whether it's worth $200K or not. We spend a fair amount of money on luxury cars, furnishings etc. My wife probably has at least $100K in jewelry and purses.

Currently our cars are about 1.5% of our NW.

 

[Time2]

Wow, 78 million! High times, congrats -

If I was in that company, I might get rid of my 26 year old Toyota T-100, even though it is working fine as our daily driver!

I guess he didn't see or didn't care about a couple decimal points.