A lot of marketing campaigns try to convince you that major purchases are worth all the money you’re going to have to pay. And while you should always be wary advertiser claims, you should be especially guarded if you’re told a purchase “holds its value” or “is a good investment.”
Sure, your purchase might be a way to invest in your comfort, convenience or lifestyle. Just don’t mistake some purchases for financial investments. Financial investments are usually assets you buy that are meant to appreciate over time, such as stocks or even a home.
Unfortunately, unlike financial investments, many major purchases depreciate quickly over time – often within seconds of the purchase.
So before you buy the following five items, remember they usually come with a high sticker price and a low rate of return.
From the get-go, timeshares cost thousands of dollars to buy into, almost $16,000 on average, reports MarketWatch. Then there are the maintenance fees due each year, which average $690 or more, depending on where the resort is located.
The costs of owning a timeshare quickly add up and eat into the supposed vacation savings you were probably promised in the sales pitch.
What’s more, you’ll almost never recoup your initial investment. In fact, it’s not uncommon for timeshares to sell for less than half their initial cost.
Some people love owning a timeshare, and think the costs are worth it. But if you are considering one, make sure you understand the expenses you’ll be facing. And buy a timeshare resale by an owner, rather than from the developer – it will almost always be cheaper.
2. New cars
Cars are purchases that are worth it because of the use you get out of them. However, they are not investments that hold their value. That makes new cars an awful deal, compared to buying a gently-used car that’s just one to three years old.
For instance, an average midsize sedan loses $7,419 of its value in the first year, according to Edmunds.com. That’s more than it depreciates in the next three years combined, which is just $5,976, or $1,992 per year.
While buying a new car can have certain perks, it’s not the most cost-effective option. Yet, you’ll save thousands and get most of your money back if you buy a model that’s just a couple years old. Then you can own it for about three years and sell it for a decent amount while avoiding the age at which most cars start needing costly repairs.
3. Major electronics
From a computer to a gaming console to a smartphone, buying new electronics is definitely convenient.
But buying used or refurbished major electronics can deliver significant savings worth hundreds of dollars, according to The New York Times. These products are thoroughly vetted by resale services like Amazon Warehouse, GameStop or Gazelle before consumers can purchase them. And, they work like new.
The good news is depreciation doesn’t happen as quickly with electronics. This is especially true of electronics that people tend to buy and keep for a long time, like computers and gaming consoles.
Savings might be less with smartphones, which consumers replace and resell more often. That’s because the newest smartphone models are usually in high demand.
Buying used smartphones only offers savings of around $50 over buying new, according to an analysis of prices from Bankrate. But if you’re buying an older model, the price difference can be as high as $200 or more.
4. New furniture
If you’re buying furniture, don’t plan to resell it. Tastes vary widely for furniture, decor trends change yearly, and you’re putting daily wear and tear on the item.
By the time you’re ready to sell, you’re unlikely to have many takers for your beloved piece of furniture. Or, if you do sell it, don’t expect to get much for your used furniture – you’d be lucky to get back 20 percent of what you originally paid.
But as a buyer, hitting local consignment stores or listing sites can be a smart way to frugally furnish a home. With some patience, you can find a piece that’s dirt-cheap and just as serviceable as a new item.
One caveat: some furniture is worth buying new. Upholstered items you spend a lot of time on, like a couch or mattress, fall in this category.
5. Home renovations
Last but not least are home renovations. As a homeowner, you might think that the home improvements costing you thousands will result in a direct rise in your home’s value. But that’s not always the case.
In fact, of all home renovations, only installing attic insulation results in a greater increase in home value than the cost of the improvement, according to a cost survey from Remodeling magazine.
Remodeling your kitchen only adds 80 percent of its nearly $21,000 cost to your home’s value. And remodeling a bathroom results in even fewer returns – just 65 percent of an $18,500 price tag.
However, like all of the items on the list, there are plenty of reasons to remodel a home besides just getting some of your money back. Most people want to update their house because it makes it more functional and pleasant to live in.
Remember, there is real value in the non-financial benefits that come with buying any of these items. But if you’re just in it for the financial gain, it’s best to skip these five purchases. There are other investments that would provide you with much better returns on your investment.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|