Cars are classified as what type of asset?

Cars are classified as depreciable assets because they typically lose value over time due to wear and tear, age, and other factors. Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life. For cars, this means that as they are used, their resale value generally decreases, which reflects the natural depreciation that occurs. This makes them different from appreciating assets, which increase in value over time, such as real estate or certain collectibles, and distinguishes them from liquid assets, which can be quickly converted into cash. Investment assets, on the other hand, are typically items that investors hold with the expectation of earning a return, like stocks or bonds, rather than for personal use.

In summary, the classification of cars as depreciable assets recognizes their expected loss in value throughout their usage period, and this understanding is key when considering vehicle ownership in personal finance.