5 Major Purchases That Immediately Lose Their Value

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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.

1. Timeshares

No matter what you hear at the infamous timeshare sales pitch, timeshares are not an investment. In reality, with a timeshare, you buy the right to enjoy a resort or vacation rental once a year.

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.

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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.325% APR to 15.615% APR (with AutoPay). Variable rates from 6.275% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of July 3, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
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5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
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5.49% – 18.24%$5,000 - $75,000Visit Earnest
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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.