Why isn’t it treated similarly to a house?
In: 111
Different assets have different properties that give them value, and lots of things go into determining the value of an asset.
Cars are one of those things that suffer from a few problems when it comes to retaining their value.
1. They require maintenance. Lots of it. When they are on the lot, they are in theory 100% maintained. Once it leaves, it is somewhere below that. Could be 99.99…%, but it could also be 0%. Value drops because risk is now involved.
2. Also, there is supply issues, namely there *are* no supply issues. There will always be more of your car, and if there isn’t chances are your car is now so old that it isn’t worth all that much money anyway, and car companies aren’t interested in recycling their cars on the second hand market which is why they constantly come out with new models almost annually. In fact, in some of the rare cases that cars actually *appreciate* in value, it’s usually because it’s a rare car, and not many were made. A company like Bugatti producing 100 cars is probably an intentional tactic to inflate up the value, which increases the value of their brand.
3. You also have the lot guarantees. When you drive it off the lot, you have things like warranties, guarantees of quality, some services they offer etc. Once it’s off the lot these guarantees are less effective, or straight up disappear. As I sort of alluded to in my last point, car companies don’t want to recycle their cars, so they aren’t in the business of putting incentives on second hand car sales, they only do so begrudgingly. They want *new* car sales.
4. Often underappreciated but the “market will charge what the market can bare.” People will ultimately pay more for the idea that their car is brand new. Even if the car was off the lot for say, a day… People are willing to pay that extra to ensure no compromise with an emotional purchase like a car.
When you look at a house however, the maths changes.
1. Houses do require maintenance. And quite often the state of the “structure” (note, not the state of the decoration) is usually a very big factor in the cost of a house.
2. There *is* a supply issue for houses. There are not enough houses in general, there are a limited amount of houses in a given area, and land in your country, and on Earth is finite. These factors all work together to give the house more value. Land is always a good investment, and unless it’s literally poisoned or radioactive, will more or less always appreciate. Many people want to live in good areas, so if you have land that happens to be in that good area, that land will fluctuate in cost with how good that area becomes. And lastly housing markets are always changing, and always big economic news… Which means people use them as assets, homes, second homes, etc. Which means lots of money gets thrown at them, which means that the chance of the price of houses going up is pretty high.
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