Cars are often seen as an extension of our personality, a way to communicate our values or desired image as we travel. Some people take this one step further and see their cars as an investment, while car insurance is seen as a way to protect that investment.

Why do some people think that cars and car insurance are an investment?

The Attraction of Antiques

We can’t all afford a Ming vase or original artwork by a legend. Far more of us can find old cars and restore them to running condition. The general appeal of antiques is that they tap into nostalgia or get attention because they are so rare. And classic cars manage to do both, while the sheer number of people who once owned them and would pay well to do so again means you could probably sell a working antique car for quite a bit of money.

This explains why many people who maintain or restore old cars see the vehicle as an investment instead of a liability or a hobby. Insurance coverage for classic vehicles is then seen as protection for that valued possession, paying the higher costs of rare replacement parts when the vehicle is damaged. The amount of work they put into the care and recovery of the vehicle makes them inflate its value, too, though there may not be demand for that model.

The American Habit of Saving Nothing

Depending on the study, half or more of Americans can’t afford to pay cash for a modest emergency like a $500 car repair or $1500 medical bill. In these cases, insurance is seen as a form of savings. You’re paying a little more each month to have a very low deductible.

They see the higher monthly or quarterly insurance bill as protection against a large deductible, they’d otherwise have to charge on a credit card. The insurance is, therefore, protected against a $1500 car repair bill that compounds at 15% interest before they can pay it off.

The Protection of an Overly Expensive Vehicle

An expensive luxury car is a liability, not an asset. It costs a lot at the onset and more if you finance it. Another downside of the expensive car is the equally inflated repair bills. A good insurance policy is seen as protection for that expensive item sitting in the garage, just as an extended warranty and maintenance plan that keeps it in top condition would be.

The fact that they are made poorer by pouring money into something that goes down in value doesn’t matter to them. In fact, some think that spending a lot of money on a luxury vehicle will magically result in wealth as if driving an expensive vehicle will make others think of them as high status and lead to a better job or higher pay.

While people may think less of an aspiring lawyer or accountant driving a Junker, a decent looking mid-market car is better for them and their image than a luxury car whose payments are higher than their rent. If your business actually pressures you to drive a new vehicle, then run the numbers. Leasing a car may be better than constantly turning over vehicles on payments. Don’t buy a car because the company gives you a car allowance; you’ll still have the car payment if you are laid off or the car allowance stops for another reason. Just buy a car that is good enough for your needs like getting you to work and taking the kids to school.

Cars are an asset, at best, that goes down in value. They are not an investment in and of themselves. Nor is car insurance an investment, though it can protect you from massive bills in case of an accident. Invest in a good car insurance policy, but don’t buy the most expensive car you can qualify for.