If you bought the car outright, with cash, and there was no loan (plus interest) payment to make each month, you’d still have to factor in servicing, MOT, VED and petrol. It takes more out of your account than it is likely to put in, unless, as I said, you use as a taxi or uber.
Most people lease or borrow money to buy a car. If you lease it, the car is never yours --and who pays the balloon payment at the end? Even with HP you’ll usually find yourself in negative equity on the car until at least the final year of the term.
Whether you’re paying for the upkeep or not, the vehicle is still an asset.
I agree that when on a lease, the car wouldn’t be your asset, however it would be the funders asset.
Whether the car is in negative equity or not is besides the point. The car is the asset in the transaction, the loan is the liability. It just happens that the liability is larger than the asset.
This is true, but unless you are in the business of selling cars, ie, you are CEO of Toyota, it’s your liability. On the basis that most people are purchasers of cars and not manufacturers/retailers of cars, it’s more often than not a liability.
I take your point and it is slightly different to a property but,
When you own a home you have to pay for the upkeep of the property, otherwise even with house price increase, the “asset” can still lose value. Every so often a room needs to be refurbished, a roof needs mending, a boiler needs replacing - these are often very costly exercises and only serve to maintain the property rarely will it massively increase the value of the property.
I would argue that an asset is simply a tangible item that is worth a sum of money - a car although quickly depreciating is still an asset, albeit it comes with liabilities.
@Gavinator.
In common parlance, one may say that a car is “a liability” because it incurs responsibilties and expense.
In accounting terminology, a car that you own is an asset. If you were to create a personal balance sheet including your possessions, it would go in the assets column.
Good point, it absolutely depends on your definition. I’m using the accounting term to define it, rather than the additional cost of upkeep/running. So I guess it’s both an asset and a liability
A home is an asset once you’ve cleared the mortgage. It’s a liability until that date because it cost you money. Some would even consider it a liability even after you’ve cleared the mortgage because it still costs you money to maintain and doesn’t generate an income.
An asset is defined as an item owned by a person or company, regarded as having value. So your house is an asset whether mortgaged or not. However even when owned outright, there are liabilities attributed to it.
Considering that the outstanding mortgage was paid off via the sale of the repossessed home, it is quite clearly an asset.
You’d struggle to pay a mortgage off with a liability.
The whole reason a deposit is used to obtain a mortgage for the property is so that the security (i.e. the property i.e. the asset) has a tangible worth.
The mortgage is a liability, the property is an asset.
