Is a Car an Asset? Here’s What You Should Know
When it comes to your vehicle, you might be wondering if it’s an asset or liability. But the answer isn’t quite as easy as you might think.
It all depends on your situation. Was your car financed or did you pay cash for it? The answer to these questions will help you determine whether your vehicle is an asset or a liability.
Keep reading to learn what you should know about your car and net worth!
What is an Asset?
Before you know whether your car is an asset, you need to know what an asset is.
By definition, an asset is “anything of value or a resource of value that can be converted into cash” according to Investopedia.
This means, that if you were to sell your item, you would receive cash in exchange.
Some common assets are listed below.
- Cash or cash equivalents
- Retirement Accounts
What is a Liability?
Alternatively to an asset is a liability.
A liability is defined as “something a person or company owes, usually a sum of money.” This means that you do not “own” the property at stake.
Liabilities can include many items such as some of these common debts.
- Student loans
- Personal loans
- Credit card debt
- Payday loans
- Auto loans
Is my Car an Asset or a Liability?
Depending on if, and how much you owe on your car, it could be considered either an asset or a liability.
- If your car is worth more than the amount of any auto loans you have on the vehicle, the difference would be considered an asset. For example, if your car is worth $15,000 and you have an outstanding loan on the vehicle for $5,000, you would net $10,000 by selling the car. This would make it an asset.
- If your car is worth less than the amount you owe, your vehicle would be considered a liability. For example, if your car is worth $15,000 but you have an outstanding auto loan of $25,000, your vehicle would be a $10,000 liability if you were to sell the car. This is also called being “upside-down” on your car payment.
What makes vehicles different than many other assets is that they depreciate over time. Typically assets will increase in value (appreciate) over time. But because a car only has a lifespan of a couple of decades, it will decrease in value up until it is considered junk.
How to Determine Your Cars Value – Easy Steps
You’ll notice in the previous section the only way to know whether your car is an asset or liability is by knowing the value of your car. But what if you don’t know this?
Don’t worry, we’ve put together a few easy ways you can determine the value of your vehicle.
Compare Local Pricing
There are many different websites that sell used cars. This can be your go-to place to determine how much yours is worth. You’ll simply need to know the year, make, model, mileage, and some of the key features to get a good estimate on your car’s worth.
Some of the most popular websites where cars are sold are:
Use Kelly Blue Book
KellyBlueBook has been around for some time now and can be a great way to determine your car’s value. They offer a step by step approach that gives you a more accurate estimate of your vehicle. They also give pricing based on the trade-in value or a private party sale.
You’ll need to know the year, make, model, mileage, and the basic features to get a good estimate of your vehicle’s worth.
You can also select the condition of your car to note any blemishes on the exterior or interior. This will help to get the true value of your car.
List it For Sale
If you’re ready to sell your car, listing it for sale can help you to understand your local market. Even if you don’t want to sell it quite yet, you might receive offers that should give you a price range of its worth.
Is my Home an Asset or a Liability?
If you own a home, you’re probably wondering if it could also be considered an asset, and for many cases, the answer is yes. Because homes typically appreciate in value, they are almost always considered assets.
But there might be some instances when it could also be considered a liability.
How to Determine my Homes Value?
Just as you’ll need to calculate your car’s net worth, you’ll need to do the same for your home, although it can be slightly more tricky. Because home values are based on many factors, your local real estate market is likely the best indicator of your home’s net worth. Below are some ways you can estimate the value of your home.
Use Real Estate Apps
Using apps like Zillow or Realtor.com you can get an estimate for your home based on the specs of your home and the current real estate market. These apps will query their database to understand the specs of your home like the age of the home, square footage, number of rooms and bathrooms, and much more.
Get an Appraisal
Whenever you buy or sell a home, most mortgage companies will require to get an appraisal to determine the home’s value. These companies will Gagne the local market as interiors of your home to get a solid estimate of your home’s worth. An appraisal can be costly but can be worth the cost if you are determining your net worth.
Conclusion: Is Your Property an Asset?
When determining whether your car is an asset or liability, you’ll need to know an estimate of the value of your car and how much (if anything) you owe for an auto loan. If your car is worth more than any outstanding loans, it’s an asset. If you owe more than it’s worth, your car is a liability.
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