Having a car is it a liabilty or an asset?
7 Discussions

This answer may look familiar, and that's because I recently answered the exact same question except that a house was being used instead of a car.

Owning a car brings a person both an asset and multiple liabilities.

Framing this in financial accounting terms, an asset is anything that is owned and which can be converted into cash by its owner.  So if you own a car, that car is your asset because you can (or in some cases, be forced to) sell it for cash at a future point in time.

A liability is an obligation to make an economic sacrifice (usually, but not always paying cash) to another entity.  In the case of cars in America, the only mandatory liabilities are usually registration fees for the license plates (how often you must pay will vary depending on where you live) and insurance premiums (because by law the car must be insured; minimum requirements will again vary by state).  Just like a house, repairs and maintenance will cost money and will be liabilities when those come up.  Fuel would be a regular expense, but if you have an all-electric vehicle then you have no fuel costs, so I don't classify the cost of gasoline as a liability here.

Another thing to consider with cars is depreciation over time.  Depreciation is considered an expense, but instead of paying this expense with cash, depreciation is deducted from the value of the car as an asset.  Once you buy a car and start driving it, its value will decrease as people are not willing to pay as much for a used car as they would for a new car.  The longer you own and drive the car, the more it depreciates.

In the end, just like home ownership, whether or not it's worth it to own a car will vary depending an individual's specific set of circumstances.  That person will have to weigh the value of a car (that will depreciate) against the liabilities that they would incur while owning that car.

Having a car can either be a liability to one or an asset, it depends on so many reasons for it to be a liability or a asset.

If a person owns a car and the use of the car is beneficial to him in the sense that it aids is day to day activities more easily and also serves as a means through which he gets his income then the car is an asset

But if one owns a car and the cost of maintaining the car and all is much higher than the income the car brings or if the car doesn't bring an income then such a car is definitely a liability to the owner

It depends where you live.

Usually people that live in a city don't really need a car.

But people that don't live in a city usually need a car to get to the city for shopping and such.

The car that works to help all human activities related to traveling turns out to have another function, which can be used only as a display. Certainly very strange, isn't it. Means that if the car is used as a display, is it included in assets or liabilities? Of course assets because every display that we have, whatever objects we have, are all assets that we have.

So the conclusion that can be taken is that a car is an object of the type of vehicle that has a function value and also a selling value which all refer to the definition of assets. So the car is an asset not a liability.

But it can be called liabiliatas if someone takes a car on credit, doing routine maintenance is of course called a liability because it is still in debt or there must still be paid to certain parties which of course makes the car arguably a liability.

4 more replies

If we have bought a car, do we just leave the car without routine maintenance? Of course not, because of the much needed routine maintenance to our cars whose goal is to be able to take care of our car for the better and not easily damaged. At this point the two aspects above are important. If the car is said to be an asset, of course it can be because the car is our personal property that we have bought and of course that has become our asset.

But cars can also be called liabilities. Because there are expenses again when we buy a car, there must be maintenance. Of course the treatment that is carried out must cost too. Well here the liability occurs, we will definitely contact the car manufacturer to do service and maintenance, this is called a liability or the obligation to return to pay something with the party concerned because we bought it.

3 more replies

When you buy a car, of course there is money spent. Even though, you can still sell private cars that have the same price. If you have used the car in years. Of course in some parts and need regular maintenance so that the condition remains excellent. Besides that, another reason is that the car is an asset that cannot provide revenue. Well, for more details, here are 4 reasons that will explain in detail whether the car is an asset or a liability.

1. Mobilize routine maintenance costs

In fact, it contains the costs that you need to spend after buying a car. One that is quite routine is the cost of care. The car that just came out of the showroom is a routine maintenance car used car. Routine maintenance and purchase of spare parts is needed so that the condition of the car you drive everyday as a support for the activities remains excellent. You want your day to have to sell it again. In this case the car is active as a liability. If you want to rent it in a few years you can say the car is an asset.

2. Cars for daily needs

In fact, a car that is used to fulfill daily needs such as workplaces, dropping off school children, holidaying on weekends is clearly not a car being an asset. You must know that a car for this purpose will certainly not bring profit. In fact, you have to spend fuel costs every day to fulfill your needs. In addition, you also have to pay a car tax that becomes an obligation.

3. The car is used for business

In fact, when you buy a car and work as a means of doing business, the car becomes an asset. Although the type of car you buy is a family car but you can use it for employees or as a rental car then move into money. Because, the car generates income for the owner.

4. Generate an amount of income in installments

In fact, there are still many Indonesians who use car loans as a payment method in having a dream car. Cash, of course, adds debt because every month the owner has a burden to repay. Not to mention the costs that have been used previously such as maintenance, fuel, taxes and insurance.

Sometimes cars can be liabilities and it some other cases it can be an asset. Asset because you don't have to endure the stress of public transport and it saves you more money or liability because it has to be fueled and maintained.