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

And when it falls apart, you’ll have to buy another one. The capital cost of the car has declined to nothing at that point – that is what depreciation is supposed to account for. Selling it has nothing to do with it – from an accounting perspective, you’d balance the remaining (non-depreciated) value of the car against the sale proceeds anyway.