Today we’re bringing you another round of He Said/She Said. These posts are really your chance as readers to hear how discussions (and sometimes disagreements) play out when managing our lives with each other. For a look at some of the past He Said/She Said discussions – check ‘em out here.
The Q1 Car Challenge has commenced! I’ve been biking to work without issues, and even biked to work through our own Florida version of the epic cold snap of last week where two mornings in a row my morning ride took place in 43 degree weather (brrr!*) before our temperatures got back to the 70’s.
Since we’re starting to really see the possibility of dropping down to one car, our language has changed from “if we sell the Jeep” to “when we sell the jeep”. And that’s where this conversation came from.
We list both of our cars as assets on our balance sheet – mostly because up until a year ago, we still had a loan against one and counting every asset that you have a liability against is one of our “rules for calculating net worth“. But the fact is, the cars are an ever shrinking part of our overall net worth, just 2.7% combined for both cars on last month’s balance sheet according to KBB.
Mr PoP doesn’t want us to feel pressured to get the KBB sales estimate on the Jeep (when we sell), so would like to see us write down the value of not only the Jeep, but both cars completely to zero on next month’s balance sheet. I like having them on there (well, at least as long as we still own them). Take a gander at both of our arguments and then cast your vote below…
We’re way better off just not counting the vehicles at all – it’s statistical noise at best, and an over-estimation of net worth at worse. If the vehicles are worth $15K right now that is about 2.4% of our net worth. At least half of the months in 2013 our net worth rose by more than 2.4%; at this point measuring the cars in that over all figure is almost a rounding error.
To make it worse, it is a rounding error that, if anything, encourages overestimation. I have serious doubts that the Jeep will fetch anywhere near its KBB value on the market, and don’t want to be caught short when the time comes to get rid of it. I think Mrs. PoP will bring up the “mark to market” argument, but this seems out of place here (or with any thinly traded asset class). By relying on the KBB, we aren’t really testing the market value of the asset on our books, we are using an estimated proxy value, based on averages across the US. True, if we sold the Jeep we would know the value of it, but we also wouldn’t have it any longer!
Occasionally Mr PoP will say something about how the car values are “just one more thing to keep track of”, but let’s get this straight. The amount of effort he puts into tracking our car values is precisely 0. I do it all, and have gotten in the habit of looking the values up on kbb.com when we renew our car insurance every 6 months. Each time it takes about 5 minutes, for a grand total of 10 minutes of my time each year. Hopefully that successfully removes “time” and “effort” from the argument here.
I think the best thing to do is to leave both cars on the books until the time that we sell. There are a couple reasons why.
- Consistency. If we take a write down now, we’ll mask the drop a little because we’re updating the value of the duplex this month, but when we sell, we’ll have a mysterious “other” cash infusion. It just makes tracking the net worth growth from month to month messy and inconsistent.
- I actually think there’s value in seeing a depreciating asset on our books, even if it only represents a small portion of our portfolio. While our real estate and retirement assets grew by leaps and bounds in 2013, the capital that sits in our driveway (and in our fancy new garage) did not. In fact, it decreased in value by 16%. Seeing this stagnant asset class month after month is a nice reminder that our vehicles cost us a lot more than just what we pay at the gas pump and I think revisiting that once a month when we go over the balance sheet is a valuable check-in.
Who would you agree with? Cast your vote and explain below!
* Mock me if you want, but for the cold mornings I wore a dry wick turtleneck, UA compression warmth running tights, a drywick jacket, and my old crew boating jacket, a scarf, gloves, and two pair of socks. It is very clear that I am a warm weather creature by nature – but I made it! And as bundled up as I was, I was only cold for the first half mile of the ride. =)