When Accounting Gets Overly Complicated-Vehicles

[slowtraveler]

I am spending slightly more than all my expenses this year so far on a motorbike. I can resell for over half it's value even if I drive it for 5 years.

In terms of tracking the expense:

1) Treat it as a daily cost amortized over 6 months?

2) Lump sum cost as purchase

3) Wait until selling to write the cost?

I'm leaning towards option 2 and then subtracting the sell price when I choose to sell later.

[2Birds1Stone]

Hmmm. I purchased a car in 2016 and at the time paid $17k. Been tracking the depreciation as an expense over the past 3 years monthly. $6k worth! I jut depreciate it on my asset sheet as it drops. Bikes are harder to gauge, especially in SE Asia. I use a conservative average of NADA, KBB, Edmund's, and Car Gurus values.

[IlliniDave]

2) seems to be the most accurate if you are paying cash for it. If you are taking a loan for it then amortizing for the length of the loan is something you could do, but it seems like too much work for what is a relatively modest expense in the grand scheme of things.

I often wander down the same thought process because I want the numbers and graphs in my omnibus spreadsheet to look "better", so there's temptation to come up with some way to peanut butter large expenses over time.

[unemployable]

Lump sum, write it down to zero. It doesn't earn interest; quite the opposite, it has carrying costs. This goes for all vehicles.

[prognastat]

I would go with 2.

Although, you may be able to resell it eventually or ride it for a long time you don't know what the future holds in store. You do know what it's costing you today though.

[classical_Liberal]

This is why personal accounting anywhere near ERE level gets so messy. If the purpose is just personal tracking, it's important to keep in mind if this is going to be a repeating expense, because then it matters. If this is a one-off, does a few grand really matter for future planning?

Personally, I like having vehicles, they are an entertainment expense. For the past 20 years I have basically spent 4-6K every 4-6 years on a used vehicle and then sold for 1-2K. Rinse repeat. As such, I just count $100 mo as an ongoing vehicle capital expense for planning purposes, then add any actualized maintenance, ins, gas each year. It's simple, effective and still provides some motivation to use it less as my ongoing gas and maintenance costs are lower. If I ever choose to go vehicle free, I'll take the $100 line item off my spending.

[Seppia]

I treat purchases based on cash flow: if I pay $1000, I input an expense of $1000.
When I'll sell it I'll record the cash coming in as "income".
Seems like the safest way to me, I'm not a publicly listed company so I don't need to make the numbers look better than they really are

[IlliniDave]

This is why personal accounting anywhere near ERE level gets so messy. If the purpose is just personal tracking, it's important to keep in mind if this is going to be a repeating expense, because then it matters. If this is a one-off, does a few grand really matter for future planning?

I think it depends on how close you are cutting it. I've been more fastidious than normal over the last 7 years in tracking expenses. What I've found is there are always one-offs and predictable-but-unpredictable-in-time expenses which over years tend to average out to somewhere around $600/mo for me at my present juncture*. It's better for me to group them together as a single, somewhat regular expense than to look at each one individually and discount them in isolation, or otherwise obscure them. YMMV, of course.

*That I have roughly 1 Jacob of expenses in that "category" alone is a commentary on the magnitude of my overall inefficiency. I feel like the Mr Creosote of fatFire guys.

[classical_Liberal]

I'm not a publicly listed company so I don't need to make the numbers look better than they really are

It depends on the amount of data you have. Someone tracking expenses for 2 years, who purchases a vehicle every ten years, makes that purchase in year two and uses your cash flow accounting. This person will have significantly skewed estimated spending.

I've been more fastidious than normal over the last 7 years in tracking expenses. What I've found is there are always one-offs and predictable-but-unpredictable-in-time expenses

If someone has a decade or more of stable spending data, I think a cash-flow approach is definitely best, everything smooths out. However, most in ERE drastically reduced spending, and accumulate near FI $'s in under 7 years. So a large purchase of something with a 5,10,20 year usable life and potential resale value really skews numbers. It ceases being helpful if it's not an accurate estimate of future outflows. So I tend to agree with I-Dave's method here, estimate the future based on known's from the past.

[George the original one]

For ERE purposes, it's a lump sum cost plus annual expenses (fuel, maintenance, insurance, taxes & licensing). One tries to get the lump to last as many years as possible with a hopeful residual value that's above the price of scrap metal.

For myself, I have a second car I use entirely for entertainment purposes. It's travel/social entertainment and "racing" entertainment and just about everything is a sunk cost because competition & travel are not cheap. I'm trying to keep mileage under 10k/yr, but it's going to be tough. "Racing" in quotes because its not wheel-to-wheel and the speeds are not above highway speeds. If the finances hit a bumpy road, this is the first guilty pleasure I'll have to give up.

[2Birds1Stone]

Autocross?

[George the original one]

Autocross (autox)
https://www.youtube.com/watch?v=kTf6008UsMw
https://www.youtube.com/watch?v=bkdyrd3QXT0

[2Birds1Stone]

Love Sea of Cones! My current landlord got me into it a few years ago. Unfortunately I don't want to beat up my daily, but it looks like SOO much fun.