The comparison between cars and homes is silly and we can end it here.
They are not comparable in every way, but with respect to depreciation, the reason they both depreciate is the same: They both deteriorate over time and with use. Depreciation measures the cost of that decay. The original context was specific about it referring to the deprecation aspects.
We’ve also established that a home that’s been maintained and updated should not only hold its original value, but be worth more than it cost.
I’m not sure that is established. It is established that it is technically possible for that to be true if new homes prices are rising in kind. That has definitely been the case over the past decade, or even the past few decades.
But over the long history? Traditionally, homes in good condition have only kept pace with inflation. Historically, if you bought a home for $100,000 then you should be able to sell it for $100,000 (we’ll assuming inflation is zero to keep things simple) a decade later, assuming you’ve kept it in the same condition. Great.
But let’s say you had to put $25,000 into upkeep during that decade. So your original cost was actually $125,000. You had to eat $25,000 in depreciation costs when you sold it for only $100,000. Had you done nothing, letting it rot over those 10 years, then the house would only sell for $75,000. You also had to eat $25,000 in deprecation costs. It’s the same either way.
I still don’t understand what the argument is.
I didn’t see an argument. What are you referring to?
They are not comparable in every way, but with respect to depreciation, the reason they both depreciate is the same: They both deteriorate over time and with use.
As it was pointed out, a car in good upkeep is only expected to last around 12 years or just over 300,000km. A home in good upkeep can last 100+ years, so what depreciation did the original poster think would happen if someone decided to sell their home after 5 or 10 years?
But let’s say you had to put $25,000 into upkeep during that decade. So your original cost was actually $125,000. You had to eat $25,000 in depreciation costs when you sold it for only $100,000. Had you done nothing, letting it rot over those 10 years, then the house would only sell for $75,000. You also had to eat $25,000 in deprecation costs. It’s the same either way.
Yes, and I agree that’s how it works. Except that home/property values fluctuate, so after 10 years, that house (and the land it sits on), even without $25,000 put into upkeep, may sell for $100,000 or more.
I didn’t see an argument. What are you referring to?
The original poster seemed to have a problem with people being able to recoup and profit from the sale of their home. I don’t see why homeownership should be at a loss when it comes time to sell. The difference between a money pit (i.e. a car) and an investment (i.e. a home) is that you can get the money back that you invested + extra if you are lucky.
The original poster seemed to have a problem with people being able to recoup and profit from the sale of their home.
The original poster seemed to have complained about government involvement distorting the market. I’m not sure that’s quite the same thing.
The difference between a money pit (i.e. a car) and an investment (i.e. a home) is that you can get the money back that you invested + extra if you are lucky.
Every car I’ve ever owned returned all the money back that I invested and then some. Why the hell would you buy one otherwise? They also depreciated, but that doesn’t matter when the gross investment returns are greater than the depreciation cost.
The original poster seemed to have complained about government involvement distorting the market. I’m not sure that’s quite the same thing.
Perhaps I didn’t understand their sarcasm. The government didn’t distort the market so that people can make money from the sale of their home and property. Unless they are going back to a time before governments, when people were trading animals for land and so on… the owner would get as much value as the person buying it had in the acquisition. This almost always turned a profit for the seller, unless they were completely desperate.
Every car I’ve ever owned returned all the money back that I invested and then some.
As in, you’ve profited from the sale of every car you’ve owned? Or that owning a vehicle, allowed to you not spend as much as you would have without one?
If it’s the former, then it would be unheard of, unless you’re omitting some critical detail.
Why the hell would you buy one otherwise?
I can’t speak for other people, but I’m sure convenience and “my job” are at the top of the pile. If given a choice, I don’t think most people would want to own a car, especially if affordable housing is on their mind.
I also don’t think many regular consumers are buying cars for some chance to profit from the sale of them afterwards. I think the majority of car owners have resigned to the fact that they will never recover the costs of owning a car.
As in, you’ve profited from the sale of every car you’ve owned?
I profited from owning productive capital. You know, an investment!
I don’t think most people would want to own a car
I certainly wouldn’t. I don’t like owning a car. But it has been hard to turn down the return on investment potential. Where else were you going to get those kinds of returns?
In the past, that is. I haven’t bought a car recently. With the price of vehicles today, it’s not clear if there is still much ROI to be had – it seems pencils have been sharpened pretty sharp. But I’m not looking for one right now either so I haven’t crunched the numbers very hard.
I also don’t think many regular consumers are buying cars for some chance to profit from the sale of them afterwards.
I wouldn’t think so either. If they are looking for a bank account that returns some interest, they’re more likely to go to a bank. But if they’re looking for an investment, cars have been pretty good (maybe no longer; we shall see).
They are not comparable in every way, but with respect to depreciation, the reason they both depreciate is the same: They both deteriorate over time and with use. Depreciation measures the cost of that decay. The original context was specific about it referring to the deprecation aspects.
I’m not sure that is established. It is established that it is technically possible for that to be true if new homes prices are rising in kind. That has definitely been the case over the past decade, or even the past few decades.
But over the long history? Traditionally, homes in good condition have only kept pace with inflation. Historically, if you bought a home for $100,000 then you should be able to sell it for $100,000 (we’ll assuming inflation is zero to keep things simple) a decade later, assuming you’ve kept it in the same condition. Great.
But let’s say you had to put $25,000 into upkeep during that decade. So your original cost was actually $125,000. You had to eat $25,000 in depreciation costs when you sold it for only $100,000. Had you done nothing, letting it rot over those 10 years, then the house would only sell for $75,000. You also had to eat $25,000 in deprecation costs. It’s the same either way.
I didn’t see an argument. What are you referring to?
As it was pointed out, a car in good upkeep is only expected to last around 12 years or just over 300,000km. A home in good upkeep can last 100+ years, so what depreciation did the original poster think would happen if someone decided to sell their home after 5 or 10 years?
Yes, and I agree that’s how it works. Except that home/property values fluctuate, so after 10 years, that house (and the land it sits on), even without $25,000 put into upkeep, may sell for $100,000 or more.
The original poster seemed to have a problem with people being able to recoup and profit from the sale of their home. I don’t see why homeownership should be at a loss when it comes time to sell. The difference between a money pit (i.e. a car) and an investment (i.e. a home) is that you can get the money back that you invested + extra if you are lucky.
The original poster seemed to have complained about government involvement distorting the market. I’m not sure that’s quite the same thing.
Every car I’ve ever owned returned all the money back that I invested and then some. Why the hell would you buy one otherwise? They also depreciated, but that doesn’t matter when the gross investment returns are greater than the depreciation cost.
Perhaps I didn’t understand their sarcasm. The government didn’t distort the market so that people can make money from the sale of their home and property. Unless they are going back to a time before governments, when people were trading animals for land and so on… the owner would get as much value as the person buying it had in the acquisition. This almost always turned a profit for the seller, unless they were completely desperate.
As in, you’ve profited from the sale of every car you’ve owned? Or that owning a vehicle, allowed to you not spend as much as you would have without one?
If it’s the former, then it would be unheard of, unless you’re omitting some critical detail.
I can’t speak for other people, but I’m sure convenience and “my job” are at the top of the pile. If given a choice, I don’t think most people would want to own a car, especially if affordable housing is on their mind.
I also don’t think many regular consumers are buying cars for some chance to profit from the sale of them afterwards. I think the majority of car owners have resigned to the fact that they will never recover the costs of owning a car.
I profited from owning productive capital. You know, an investment!
I certainly wouldn’t. I don’t like owning a car. But it has been hard to turn down the return on investment potential. Where else were you going to get those kinds of returns?
In the past, that is. I haven’t bought a car recently. With the price of vehicles today, it’s not clear if there is still much ROI to be had – it seems pencils have been sharpened pretty sharp. But I’m not looking for one right now either so I haven’t crunched the numbers very hard.
I wouldn’t think so either. If they are looking for a bank account that returns some interest, they’re more likely to go to a bank. But if they’re looking for an investment, cars have been pretty good (maybe no longer; we shall see).