ROI, or “return on investment” tracks how much money you get back on your purchase after time, relative to the initial cost. It refers to how much you can sell your asset for after you’ve purchased and (possibly) invested in it over time. A house, for example, usually has great ROI. The property value increases over time, especially if you renovate or give it a little face lift.
Is a car a good investment? Unfortunately, car-buying doesn’t have a great reputation when it comes to ROI. Your car drops in value the second you drive it off the lot. And it loses 20% to 30% of its value just in the first year. Despite the circumstances, there are ways to maximize ROI on your vehicle and take full advantage of owning a vehicle.
Dealerships are the easiest path to buying a car, but tread easy. New cars are the most expensive and rarely give you the bang for the buck you're looking for. Though we don’t want to generalize all car salespeople, new car dealers are all about getting you to buy the most accessories and amping up that price.
The cars listed on Kelly Bluebook’s top resale list only hold 50% of their value for about five years. And those are the top resale vehicles. In other words, in five years your new car is already worth half (or less) of what it was when you purchased it.
If you want to maximize ROI on your vehicle, avoid buying a car at full price. Get a discount! Buying used is the best way to invest in a car. You can easily avoid that initial steep depreciation (loss in value) on your vehicle. Let someone else take on that loss!
The classifieds, whether online marketplaces like Craigslist or physical listings in the newspaper, are fantastic options for purchasing a used vehicle. You can find people who are trying to get rid of their car as quickly as possible or others who are willing to negotiate the price.
You don’t want to buy from just anyone, which is why having some technical car mechanic knowledge is helpful in the process. Not car savvy? Call your mechanic and have him or her take a look at the vehicle you’re looking to purchase.
There are all sorts of online marketplaces for purchasing used vehicles that have emerged in recent years. Check out cars.com, autotrader.com, or carvana.com and scan the vehicles history reports, mileage, and owner history. Most of the sites have great return policies and will even bring the car to your door for a test drive.
Auto auctions, particularly the dealer-only auctions, are great places to get insane discounts on a wide variety of vehicles. But it’s true that navigating the auto auction world is more complicated than other used-car avenues. So you’ll want to call up your mechanic again and also hire a car broker to get you the most secure deals.
Car values can ebb and flow with the economy. High fuel prices, for example, can tank the value of larger SUVs and “gas guzzlers.” You may get a better price on an SUV during a season of gasoline spikes!
There are even trends in car colors. If white cars are all the rage, that white sedan you’re looking at will probably be more expensive than the red one. Invest in a car that’s really worth it (the red one!) and get more for your money.
Certain cars have a higher ROI than others. Research cars with investment potential to figure out which will give you the highest resale value. A handful of Subaru and Porsche models, for example, made Kelly Blue Book’s top of the Best 2020 Resale Value Award List.
But when it comes to cars as an investment, ROI is more than just the resale value. Maybe you’re not looking to resell any time soon, but are looking for a car that lasts without major mechanical problems. Again, research is helpful here. Have there been any recalls in the make and model? What do people say about the car’s longevity? A car may look shiny and new, but if it’s a faulty model or an unreliable brand, it could easily turn into a money pit with no return.
Once you’ve purchased your vehicle, you may think there’s nothing else you can do to maximize your ROI. Think again! Routine maintenance is key to getting the most out of your car and ensuring it continues to work properly for a long time. That means regular oil changes, trips to the carwash, and bringing it into a trusted mechanic every now and then for a checkup. Maintenance can prevent future costly issues and also keeps your car in tip top shape for resale.
Another way to maximize your ROI after purchase is to take full advantage of your vehicle. You’ll obviously get to enjoy all the perks when you invest in a car: great road trips, a quick commute to work and play, and a much easier shopping experience. But did you know you can actually make money on your car and not lose it?
Avail helps car owners (that’s you!) turn their parked cars into cash. With car sharing, you let other trusted people in your city borrow your car and make money in the process. You sign up for Avail, drop your car off, and rake in up to $35 a day.
Your car doesn’t have to be a money pit. It can actually be a moneymaker. Maximize it by putting your car to work while you’re not using it.
Learning how to make money while traveling can help you stay on the road longer. Read more about how to make money while you travel.
There are all sorts of creative ways to get the wheels you’ve always wanted.