Ruben Licera | Business Coach and Mentor

Is my Car An Asset or a Liability

Is Your car an Asset or a Liability?

I own a car. I choose a Toyota Fortuner 2017. But for this choice, it took me a year to analyze if I really need another one. Upon looking at my “Is my car an Asset or a Liability?”.

ASSET and LIABILITY Defined

asset-liability
image source: philkotse.com

Is my car an asset or liability?, an asset is anything that is controlled by an individual, a corporation, or a nation which is of economic value, and is expected to generate an income or return future benefits. It can be in the form of a company stocks, real estates, businesses, and any tangible and intangible economic resource. 

A liability is the other way around, it is a claim against the assets. Liabilities are financial drawbacks that arise from previous business transactions or operations. It is anything that causes you something but doesn’t return any profit or benefit just like an asset.

You drive for Uber or Grab, then it is generating an income, therefore it is an asset. But, if you purchased your car under a loan, pays for its gas, and maintenance, but not making any profit out of it? then it surely is a liability.

The true cost of “Investing” in a car

Investing-in-a-car
image source: nerdwallet.com

All right. Imagine you have already saved up enough for the payment of the car you’ve been eyeing for months now and that you have allotted a certain amount of your monthly income for its other expenses. You are ready to withdraw your bundle of cash and head out to the nearest car showroom and drive out with your new car. But the question now is, can you really afford it, can you really afford “owning that” that new car?

Many of us are unaware of the fact that the real cost of having a car doesn’t end on its selling price. Owning a car generates a certain amount of expenses and accountabilities as time goes by. This is one of the reason why many classify a car as a liability rather than an asset. Maintenance cost, repair cost, mortgage/lease payment, car insurance, down to car parking and toll fees are all included in the cost of owning a private vehicle. Situations are worse when the car is already really old and the average annual cost for its maintenance and repairs exceed its current value.

In case you have decided to purchase a car already but haven’t decided on what model you will get yet, you can check this guide for cheap new cars . The price ranges from P500,000 to a little over P800,000 which is just ideal when you’re looking into an entry level but worth it buy.

Let’s say that in this case, the car you bought costs P500,000; now let us dissect the details and determine the real cost of owning a car:

  • Fuel costs= P6,750.00/month

P45/L gas x 50 km. ave. daily mileage x 30days/month ÷10 km/L(fuel economy)

  • Maintenance= P1,000.00/month

(change oil, car repairs, lights, etc.)

  • Toll Fee= P5,500.00/month

P250 (back and forth) x 22 working days (varies upon area)

  • Parking fee= P3,300.00/month

PhP 150 (for 8-hours) x 22 working days

  • Car insurance= P950/month

LTO required minimum monthly car insurance. For more info about this, you can refer to this article explaining the details about CTPL or Compulsory Third Party Liability insurance .

That is a total of staggering P32,500 per month (excluding the price of owning it) and they are just rough approximates and real cost might increase or decrease depending on usage or location.

Is Having a CAR your worst investment?

CAR-your-worst-investment
image source: thebalance.com

The old rich, the wealth builders, and the wise money handlers all know that as much as possible every dollar or peso they spend will give them back profits, each dollar that comes out of their pockets are investment. Even if stock markets and trading are not your thing, you surely know that when you buy an investment, a stock perhaps, you should be able to sell it at a much higher value later on.

Let’s make up an imaginary situation. You have P500,000 to invest and then an investment broker came up to you with a new investment proposal. He tries to convince you by saying that his investment proposal is one of the most popular in the country, and a lot of people have invested on this. So you asked, “How much profit will I gain in this investment?” But the answer he gave was not what you were expecting at all, he told you that the chances are you will not actually make money out of it, and you will surely lose more than a half of your investment in just years.

So who then in their right mind to invest in this so called investment? The short answer is, YOU. The moment you bought that car or signed the deal and drove it out from the showroom, you already signed up in this investment.

The fact is: Any car is usually a fast depreciating asset. The moment you drive it out of the showroom it already loses 20% of its original value and a 10% decrease in its value for every year it ages. As it ages, it loses value rapidly and drastically.

Depreciation is the largest cost factor in the cost of owning a car. With that depreciating trend mentioned, your P500,000 car is only worth P400,00 the moment you drive out. Then worth P360,000 by the second year, P324,000 by its third year, P292,000 by the fourth year. And by the end of five years it is now valued only P263,000, a total of 52% depreciation.

When your car becomes a Liability?

car-becomes-a-Liability
image source: waterman.co.uk

When viewed at a financial standpoint, most car owners consider their cars as a liability. But that doesn’t mean it’s a worthless investment at all. If it makes your travel faster, then good. If it makes you feel safer traveling alone inside your private car, then good. If it makes your life a whole lot better, then it is a worthwhile investment after all.

How to Turn Your Car into a Moneymaker

Car-into-a-Moneymaker
image source: pinterest.com

A car can be converted into an investment asset when you use it to improve business operations, deliver goods and orders, or used as a rental car service.
As you pursue with life, the goal of finding a work and an income that gives you financial independence becomes apparently important. But in the process you decided that it’s time for you to buy that dream car you’ve been ogling at for long. Then you realize that your car might be a money grave, with maintenance cost, repair cost, gas, insurance, toll, parking, and other fees that are looming around you’re supposedly investment.  

When you decided that you wanted that car, you began to investigate the ways you could do to earn enough in order to afford it. And now that you have it, the things you should look for is how to turn things around, how do you make this liability into a moneymaking asset. Nevertheless, despite all those expenses, your car could give you money back in some ways.

Technology might not be for everyone, but for many, it has paved way to a lot of opportunities. With the new technologies, you just install an application on your device, and you could use your talents, assets, or even liabilities to start a small business or find work wherever you are, whenever you feel like it. Taking advantage of the sprout of new technology services that utilize the so called shared economy is one way to do it. Shared economy is simply turning a property, a house or a spare room or even your car, into cash by efficiently sharing it with other people. How? Below are ways on how to turn your car into an effective moneymaking tool.

Drive for Uber or Grab.

Drive-for-Uber-or-Grab
image source: timelyenterprise.com.sg

This is obviously the most popular way to turn your car into a moneymaker nowadays. As long as you have a clean record and your car could accommodate passengers, then you are just a few taps away from becoming a driver for these popular ride sharing services. Grab, Uber, and other ride sharing apps grew to popularity because of its convenience and safety. There is no need to hail a taxi and risk of being taken advantage of rogue taxi drivers, and this is what turning a lot of people to use these services. This growing popularity ensures that your venture into this services will give you money back and turn your car into an effective asset.

Here’s how you can drive for Uber https://www.uber.com/en-PH/drive/requirements/. And here’s how you can be a Grab driver https://www.grab.com/sg/driver/taxi/.

Advertise to Passengers

Advertise-to-Passengers
image source: motiondigest.com

Now that you are considering driving for Uber or Grab, you might think of ways that could give you more returns as you drive people to their destinations. There is this app called Vugo, you just sign up for an account and the will give you advertisement materials that will be visible to your passengers. And when they interact with these ads, you get a commission, that easy. And the more passengers you’ll get, the more likely that you will earn from it. Little as it may seem, but these commissions pile up and can save you parking fees or toll fees without having to do any extra.

Make your car an advertising space

Advertising-space
image source: campaignasia.com

Whether you are driving other people to their destinations or you are simply going out, you can still use your car to somewhat generate an income. Print-on-demand online sites like CafePress and Galloree prints and sells personalize or custom magnets that you can attach to your car to promote your business if you own one. Buy a few of these and place it to where your pasengers or other people will see it and you basically saved up for advertising fees and increased the possible income of your other business. Let’s say that aside from ridesharing you also ventured in the food business, you could also actually bring items that you are selling and give your passengers a free taste of it and promote your food business to them.

Advertising-space
image source: campaignasia.com

What if you don’t have any other business to promote? That’s not a problem at all, you can still turn your car into a rolling ad space as long as it is still in good shape and new. Carvertise and Wrapify offer services that you could turn your car into an advertising vehicle. You are going to be paid per mile you travel, better thing is that if you are driving in the metro, more people will see your ads.

Lease or Rent your car

Is my Car An Asset or a Liability - Lease or Rent your car
image source: forrich.com

Let’s say that you can’t drive for Uber or Grab for a week or more because of an out of town trip or you have to rush a week’s worth of orders on your other business. Your car will be just there parked and not making any income for you, so the best way to take advantage of this is to lease your car for travelers who will be staying in your area for a period of time. Don’t worry being scammed or carnapped because there is a service called Turo. Turo is a website where you can offer your car as a rental car, the good thing is you get to choose the daily rental fee for your car. Try leasing your car for a few days per month and you could rack up to a few thousand pesos, enough for the insurance and other ownership costs of your car.

Run errands for others

Is my Car An Asset or a Liability - Run errands for others
image source: ladiesrunningerrands.com.au

Imagine that while driving, you could carry with you parcels that you will deliver to other people. Or you could run other errands for other people nearby in exchange for some money. If that sounds good to you then you could check out TaskRabbit, errands range from mounting a flatscreen TV to installing new bookshelves and even lifting or shifting heavy house furniture. Owning a car can make yourself available to clients faster which in return improve your customer’s loyalty.

Takeaways…

Is my Car An Asset or a Liability - Takeaways
image source: moneylion.com

There are endless possibilities on how you could be able to turn your car into a lucrative investment. It may depreciate in value but the possible income it could generate grows as you get more creative on ways to harness the potentials of turning your car into a money making tool.

Changing your mindset is changing your life. After all, living is all about mindset, when you purchased your car, you only thought is you could afford it but not “how” you could afford it. But now that you have shifted your mindset, the things you want, the things that are usually seen as liabilities could actually make you money. You just need to choose the right things to invest on and get your creative juices flowing on how you could monetize on them better.

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