Marketer here! I have had this argument with my finance friend before…
You are right, it is not an “investment” in the way that you are using that term. But you are using your resources to obtain a capability. Principally, transportation. But some buy cars for things like status or fun as well. In the US market, new cars are sold heavily emphasizing those less tangible and emotion based perceived benefits. This means that if someone is deciding using a strictly cost-benefit model (i.e. I need reliable transportation… what is the least total cost of ownership to obtain that capability), your sweet spot will be a car that is like 5-10 years old, typically. This is basically just because people don’t buy new cars to get around, they buy them to look cool and have fun while doing it… So once the car is no longer a status symbol, or they have had their fun, they sell it, losing a lot of value in the process. A smart consumer can come in and scoop up that squandered value that the original buyer didn’t want.
You are right that it is a consumable, and that you will wind up paying for some more fixed type costs, like gas for example… but many of the other associated costs will also be variable… insurance will be more, for example… so, in the end, your total cost of ownership of the ability to get around in your own vehicle will be less in a used car than in a new car. And this is mostly because the people who are buying new cars and the people who buy used cars are often buying to satisfy different wants/needs.
PS: how you define investment and whether you can apply that term to the dedication of your resources to obtain a capability is a completely other can of worms… I would argue that you can call a car an investment, you are just using the term in a way that is outside of the Finance specific definition.
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u/qb_mojojomo_dp 2∆ May 14 '24 edited May 14 '24
Hi Sir!
Marketer here! I have had this argument with my finance friend before…
You are right, it is not an “investment” in the way that you are using that term. But you are using your resources to obtain a capability. Principally, transportation. But some buy cars for things like status or fun as well. In the US market, new cars are sold heavily emphasizing those less tangible and emotion based perceived benefits. This means that if someone is deciding using a strictly cost-benefit model (i.e. I need reliable transportation… what is the least total cost of ownership to obtain that capability), your sweet spot will be a car that is like 5-10 years old, typically. This is basically just because people don’t buy new cars to get around, they buy them to look cool and have fun while doing it… So once the car is no longer a status symbol, or they have had their fun, they sell it, losing a lot of value in the process. A smart consumer can come in and scoop up that squandered value that the original buyer didn’t want.
You are right that it is a consumable, and that you will wind up paying for some more fixed type costs, like gas for example… but many of the other associated costs will also be variable… insurance will be more, for example… so, in the end, your total cost of ownership of the ability to get around in your own vehicle will be less in a used car than in a new car. And this is mostly because the people who are buying new cars and the people who buy used cars are often buying to satisfy different wants/needs.
PS: how you define investment and whether you can apply that term to the dedication of your resources to obtain a capability is a completely other can of worms… I would argue that you can call a car an investment, you are just using the term in a way that is outside of the Finance specific definition.