---
title: "My Tesla Taught Me More About Property Investment Than Any Textbook"
description: "Why depreciating assets like cars destroy wealth while property builds it. Real numbers comparing Tesla depreciation to Melbourne property appreciation. Asset allocation lessons for Australian investors."
author: Joey Don
date: 2022-09-08
category: Finance & Tax
url: https://premiumrea.com.au/blog/depreciating-assets-vs-property-tesla-lesson
tags: ["depreciating assets", "property investment", "Tesla", "wealth building", "asset allocation", "financial planning"]
---

# My Tesla Taught Me More About Property Investment Than Any Textbook

*By Joey Don, Co-Founder & CEO at PremiumRea — 2022-09-08*

> I drive a Tesla. I bought it because I thought it was a sensible financial decision — low running costs, no fuel, minimal maintenance. What I did not account for was the speed at which a $65,000 vehicle becomes a $42,000 vehicle. In eighteen months. Sitting in my garage.

I drive a Tesla. I bought it because I thought it was a sensible financial decision — low running costs, no fuel, minimal maintenance. What I did not account for was the speed at which a $65,000 vehicle becomes a $42,000 vehicle. In eighteen months. Sitting in my garage.

Twenty-three thousand dollars. Gone. Not spent on repairs. Not lost in an accident. Just evaporated through the quiet, relentless force of depreciation.

Here is what makes it worse. At the same time my Tesla was losing $23,000 in value, one of our client properties in Hampton Park — purchased for $590,000 — appreciated by roughly $80,000. The property also generated $850 per week in rental income. The Tesla generated electricity bills.

I am not writing this to complain about Tesla. The car is fine. It gets me from A to B. But it taught me something that I now share with every client who walks through our door at Optima Real Estate: the single most destructive financial habit in Australia is buying depreciating assets with money that could purchase appreciating ones [1].

Let me put real numbers on this.

## The maths of depreciation versus appreciation

A new car in Australia depreciates by approximately 20 to 25 per cent in the first year and 10 to 15 per cent per year thereafter. By year five, the average car retains 35 to 45 per cent of its purchase price. An electric vehicle can depreciate even faster due to rapid technology improvement and battery degradation concerns [2].

My Tesla cost $65,000. At current depreciation rates, it will be worth approximately $25,000 in five years. Total loss: $40,000.

Now consider a property purchased for the same $65,000 — not as a deposit, but as the total outlay. With $65,000 as a 10 per cent deposit, you control a $650,000 property. Using Melbourne southeast corridor growth rates of 6 to 8 per cent per year, that property appreciates by $39,000 to $52,000 annually. In five years, you are looking at $195,000 to $260,000 in capital growth — on a $65,000 outlay.

The car: minus $40,000.
The property deposit: plus $195,000 to $260,000.

Same starting capital. Opposite outcomes. One loses value every single day. The other gains value every single day and pays you rent while doing it.

I drive roughly 3,000 to 4,000 kilometres per year. My Tesla sits in the garage for approximately 340 days of the year. A $65,000 asset, sitting idle, losing $12,500 in its first year alone. Meanwhile, my investment properties work 365 days a year, 24 hours a day, appreciating and generating income whether I pay attention to them or not [3].

This is the fundamental asymmetry between depreciating and appreciating assets. And most Australians have their capital allocation exactly backwards.

## Australia's addiction to depreciating assets

The average Australian household owns 1.8 motor vehicles with a combined value of approximately $45,000. The average Australian household has $2,200 in credit card debt. The average Australian household has approximately $230,000 in superannuation.

Now consider this: the median house price in Melbourne is approximately $780,000. A 10 per cent deposit is $78,000. The average household has $45,000 tied up in cars and $2,200 in high-interest credit card debt. If they sold one car ($25,000) and paid off the credit card ($2,200), they would free up $27,200 — roughly a third of a property deposit [4].

I am not suggesting everyone should live without a car. That is impractical in most of Melbourne. But I am suggesting that the decision to spend $65,000 on a new car when that same money could serve as a deposit on a $650,000 asset has generational financial consequences.

Over a 20-year period, the car depreciates to near-zero. The property, at conservative 5 per cent annual growth, grows from $650,000 to $1,725,000. That is $1,075,000 in capital growth. Plus 20 years of rental income. Minus mortgage costs, of course — but the net position is overwhelmingly positive.

The 20-year cost of owning a new car every five years (four cars at $50,000 average): $200,000 in purchase costs, minus $80,000 in resale value = $120,000 in depreciation. Plus fuel, insurance, registration, and servicing — roughly $8,000 per year or $160,000 over 20 years. Total cost of car ownership over 20 years: approximately $280,000 [5].

That $280,000, invested in property deposits at 10 per cent, could control $2.8 million in appreciating assets. The opportunity cost of car ownership is staggering when you run the numbers.

## Why the garage matters more than you think

Here is an oddly specific lesson from owning a Tesla that relates directly to property investment.

If you do not have a garage, do not buy a Tesla. Or any electric vehicle. The paint quality on most EVs — and I say this as someone who owns one — is not built for Australian conditions. UV exposure, bird droppings, tree sap, hail — all of these cause disproportionate damage to EV paintwork because the paint layers are thinner than traditional vehicles. Within twelve months, my car had micro-swirl scratches across every panel despite never being in an accident.

The relevance to property? Assets require infrastructure to maintain their value. A car without a garage depreciates faster. A property without maintenance depreciates faster. A rental property without competent management depreciates in both physical condition and rental value.

This is why property management is not optional — it is infrastructure. At Optima, we maintain a property manager to property ratio of 1:50, versus the industry average of 1:170. That density of management attention is the infrastructure that preserves and grows asset value. It is the garage for your investment property [6].

A poorly managed rental property with deferred maintenance, unscreened tenants, and reactive rather than proactive management will depreciate in real terms even while the land value appreciates. You end up with a property that is worth less than it should be, renting for less than it should, and costing more to maintain than it should.

The car taught me this: if you are going to own an asset, invest in the infrastructure to maintain it. Otherwise, you are just watching your money evaporate.

## The one depreciating asset that builds wealth (and why property investors should pay attention)

There is one category of depreciating asset that property investors should actively seek: the building on top of the land.

I know I just spent three sections arguing against depreciating assets. But in the context of investment property, the building's depreciation is actually a tax advantage.

Under Division 43 of the Income Tax Assessment Act, residential buildings constructed after 1987 can be depreciated at 2.5 per cent per year over 40 years. On a $200,000 building value, that is $5,000 per year in tax deductions — a deduction for an expense you never actually pay [7].

Plus Division 40 plant and equipment items — carpets, blinds, hot water systems, air conditioners, cooktops — depreciate over their effective lives. A new hot water system ($2,000) might depreciate at 15 per cent per year. A new split-system air conditioner ($3,000) at 20 per cent per year.

For a typical investment property in Melbourne's southeast purchased for $600,000 to $700,000 with a building value of $150,000 to $200,000, the combined Division 43 and Division 40 depreciation can deliver $8,000 to $15,000 in tax deductions in the first year. At a marginal tax rate of 37 per cent, that is $3,000 to $5,500 in tax savings [8].

So here is the irony: the depreciation of the building on your investment property puts money back in your pocket. The depreciation of the car in your garage takes money out.

Same financial principle. Opposite outcomes. Because the tax system treats investment assets and personal assets differently. One rewards you for depreciation. The other punishes you.

## What I would do differently (and what I tell every client)

If I could go back to the day I bought the Tesla, would I make the same decision? Honestly, probably yes — but I would make it with open eyes.

The car was a luxury purchase. I earned it. I enjoy it (when it is not developing new paint imperfections). But it was $65,000 that is now worth $42,000, and next year it will be worth $36,000, and the year after that $31,000. At no point will it generate income or appreciate in value.

What I tell every client at Optima is this: build your appreciating asset base first. Buy the investment properties. Build the portfolio. Get the rental income flowing. Get the capital growth compounding. And then — only then — reward yourself with the depreciating assets.

The clients who build wealth fastest are not the ones who earn the most. They are the ones who allocate capital most efficiently. They drive reasonable cars. They live in modest homes (or rent and invest, using the rentvesting strategy). They put every surplus dollar into assets that grow.

One of our most successful clients drives a 2012 Toyota Camry. He owns four investment properties worth a combined $2.8 million. His net rental income after all expenses covers his entire living costs. He could buy any car he wants. He does not, because he understands that a $65,000 car is a $650,000 investment property that he chose not to buy [9].

The maths is not complicated. The discipline is.

I still drive the Tesla. But every time I see a new scratch on the paint, I think about the Hampton Park property that gained $80,000 while my car lost $23,000. And I remind myself which asset class actually builds wealth.

Property appreciates. Cars depreciate. The numbers do not lie.

## References

1. [Optima Real Estate, Hampton Park Case Study (15 Wren St), 2020. $590,000 purchase, $850/week rent, approximately $80,000 appreciation in 18-month period.](#)
2. [RACV, 'New Car Depreciation Rates Australia', 2019. Average first-year depreciation of 20–25% for new vehicles, with EV-specific depreciation data.](https://www.racv.com.au/on-the-road/buying-a-car.html)
3. [ABS (Australian Bureau of Statistics), 'Motor Vehicle Census, Australia', 2019. Average annual kilometres driven per passenger vehicle in Victoria.](https://www.abs.gov.au/statistics/industry/tourism-and-transport/motor-vehicle-census-australia)
4. [ABS, 'Household Income and Wealth, Australia', 2017-18. Data on average household vehicle ownership, credit card debt, and superannuation balances.](https://www.abs.gov.au/statistics/economy/finance/household-income-and-wealth-australia)
5. [AAA (Australian Automobile Association), 'Transport Affordability Index', Q1 2020. Annual costs of car ownership including fuel, insurance, registration, and servicing.](https://www.aaa.asn.au/transport-affordability-index/)
6. [Optima Real Estate, Property Management Standards, 2020. PM-to-property ratio of 1:50 versus industry average of 1:170.](#)
7. [ATO, 'Capital Works Deductions (Division 43)', 2019. Depreciation rate of 2.5% per year over 40 years for residential buildings constructed after September 1987.](https://www.ato.gov.au/business/depreciation-and-capital-expenses-and-allowances/)
8. [BMT Tax Depreciation, 'Average First-Year Depreciation Deductions', 2020. Division 43 and Division 40 combined depreciation estimates for Melbourne residential investment properties.](https://www.bmtqs.com.au/bmt-rate-finder)
9. [Optima Real Estate, Client Portfolio Case Study, 2020. Client with four investment properties ($2.8M combined value) demonstrating capital-efficient asset allocation.](#)

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Source: https://premiumrea.com.au/blog/depreciating-assets-vs-property-tesla-lesson
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent