Recently watched [this video](https://www.youtube.com/watch?v=ztHZj6QNlkM) which puts a significant chunk of the cost of owning the vehicle into depreciation. Wouldn’t the loss in value of the vehicle only matter to me if I bought this car with the intent to sell it in the future? I *could* drive the car until the engine block falls apart and it becomes basically unsellable.
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Depreciation is recognizing the cost today of replacing an item in the future, based on how much of it you used up.
In the business world this is important because if you don’t take that loss of value into consideration, it can misrepresent the company’s actual profitability by failing to take into account that some portion of your revenue will need to go to investing in new equipment eventually to stay at the current level.
The IRS typically allows businesses 7 years to “straight line” depreciate assets, but companies can use any of a number of ways under generally accepted accounting principles to depreciate assets’ book values. These could be units produced, cumulative uptime, % of service life, etc. This is the major basis of the “tax-book difference” of assets, and one reason why companies have tax credits that appear to reduce their tax rate in a given year: they may have depreciated an asset only 1/10 if its value one year, but they could only claim 1/7 of its value on taxes, for example.
Anyway, as it relates to personal finance, the fact that your vehicle is going to have no value to you at some point (regardless of when) means that you should be treating the replacement of the vehicle as a cost you need to account for today.
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