We see it over and over again: vehicles listed in the “asset” category of the family balance sheet. Banks and lenders want to know about your vehicle when they are considering whether to approve your loan request.
Often, vehicle ownership will be used as collateral in the case of a default when it comes to your mortgage, loan, or other debt.
However, even despite all of these indications that your car or truck is an asset, it doesn’t belong on the “asset” line of your net worth calculation. It also doesn’t belong on the liability line of that calculation either; after all, you wouldn’t put your favourite sweater in either the asset or the liability categories of your net worth calculation and that is what including a vehicle in that portion is like.
Your vehicle is not an asset, in simple terms, because you do not get a return on it.
Unlike your house or your life savings, you can’t sell your vehicle at a profit (unless it’s a classic vehicle or an antique, in which case, this doesn’t apply to you).
Assets are something that make you money or generate income, or, at the very least, hold their value for an extended period of time. Your house is an asset because, more often than not, you can sell it for more than you paid for it (or at least what you paid for it). Your investments are assets because you can turn them into cash.
If you sell your truck three years after you buy it, you’ll be taking a loss; it does not generate income during the life of the product, it costs you money instead.
It depreciates substantially the moment you drive it off the lot, so even if you were to buy it and hold it, you’d never be able to sell it for the same amount that you bought it for.
Your vehicle is not an asset, but a tool to get you from place to place.