general
Depreciation
Depreciation is the decline in an asset's value over time due to wear, age, or obsolescence. For vehicles, depreciation is typically the largest true cost of ownership — far exceeding fuel, insurance, or maintenance.
A new car loses roughly 15–25% of its value in the first year and 50–60% over five years. Buying a two-year-old car instead of new can save $5,000–$15,000 in depreciation alone.
In business and real estate accounting, depreciation is a non-cash expense that reduces taxable income. Rental property investors use depreciation deductions to reduce tax on rental income — one of the primary tax advantages of real estate investing.
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- Opportunity Cost
- Opportunity cost is the value of the best alternative you give up when making a choice. In finance, it most commonly refers to the return you forgo by keeping money in a low-yield account instead of investing it.
- Net Worth
- Net worth is the total value of everything you own (assets) minus everything you owe (liabilities). It is the most comprehensive single-number measure of financial health.
- Cash Flow
- Cash flow is the net movement of money in and out over a period. Positive cash flow (income exceeds expenses) is the foundation of wealth building. Negative cash flow means you're spending more than you earn.
Frequently asked questions
What is Depreciation?
Depreciation is the decline in an asset's value over time due to wear, age, or obsolescence. For vehicles, depreciation is typically the largest true cost of ownership — far exceeding fuel, insurance, or maintenance.