Is your car an asset?
When you approach the bank for a loan of any type, they always ask you to complete forms covering your income, assets and liabilities.
Income: Money coming in
Assets: Investments that appreciate over time and brings money in
Liabilities: Debts and money owed, causing you to pay money out
At the end of the day, the accountant's definition of an asset simplified, is any item/investment whether tangible or intangible, that you own and control that can be sold and converted into money.
Technically your car is considered by the bank as an asset, however it's not the best type of asset to have. Its value depreciates(decreases) over time and it requires you to constantly pay money to maintain it and drive it around.
I never consider my car as an asset because it doesn't generate any income and it really is a big noose around my neck figuratively speaking in terms of all the upkeep expenses. I'll never know its resale value until I try to sell it so how can I include it as an asset when I'm unsure of its resale value?
Is your home an asset? Not according to Robert Kiyosaki.
Robert Kiyosaki (author of Rich Dad, Poor Dad) created an uproar when he wrote that your house is a liability.
Technically the banks consider your house to be an asset. So why did Kiyosaki write that your house is a liability?
He considers the house to be a liability because you live in the house, pay money to fix up and maintain the house AND it doesn't generate an income for you unless you rent out a few rooms or rent out the entire house.
The house is unlike a car because its value generally increases over time so personally, I use it in my calculations as an asset.
I know housing in the US and the UK has had a crash lately but at the end of the day, looking long term in a few decades time as population increases, housing price(particularly land value) will increase and someone will want to buy it from you. Whereas your car will be an utterly worthless piece of junk in a few decades time.
Although it sounds like I'm being anal and making a huge fuss over nothing, if you cruise the PF blogs and check out what other blogger's net worth is, you can't quite compare the bloggers because some omit the car and the house, some omit just the car and some include both.
All of them will tell you whether they include the car or the house because they're just as anal lol Anyhoo, just thought I'd do a bit of myth busting on the topic of cars and houses and whether they're assets or liabilities.