Doesn’t factoring depreciation into the cost of car ownership rely on the assumption that you will eventually sell that car? If so, why is that a reasonable assumption?

Question

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.

In: 2782

Answer 1

Jesus… a lot of terrible answers in here.

Depreciation is an accounting tool to get an asset that gets “used up” off the books. A car gets used up, we can generally thumb how long that will take and start depreciating the asset right away.

The reason is when doing “the books” say we have 10k in cash on there. So our assets are 10k. Well we buy a car with it. Our assets are still 10k. But after 3 years that car just isn’t worth 10k anymore and we need our assets to reflect that.

So we depreciate certain assets.