4 Purchases With Financing Options That Depreciate Fast

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It's refund season. Unfortunately, the first thing most people do when they receive their tax refund is purchase big ticket items that often depreciate in value. Far worse, sometimes the refund is used as a down payment, and the purchase still requires financing. Or, it's bought before the money actually arrives and carried as a credit card balance — believing you'll use your refund to pay it off. (See also: 8 Smart Things to Do With Your Tax Refund)

Investing your tax refund in smart, long-lasting purchases you really need is one thing. But using the money on big-ticket items that are certain to depreciate is a losing financial proposition. Consider avoiding these depreciating purchases:

1. Jewelry

Suze Orman likes to point out that she always wears the same jewelry. I'm the same way. Unless it's for a truly special occasion — such as an engagement ring, wedding band, or anniversary gift — jewelry isn't something you should buy often. Precious stones, in particular, tend to depreciate hard and fast. Ira Weissman, a 10-year veteran in the diamond business, says diamonds are a terrible waste of your money because their value often drops to less than half after your purchase.

2. Automobiles

You've heard that cars lose their value the moment you drive off the lot. So, why pump so much money into something that will never appreciate in value, will only cost more money over time, and ultimately need to be replaced? And worse, why would you finance a new vehicle — taking on additional debt on top of a depreciating asset — if you don't really need a new car?

The good news is, consumers have wised up to the truth about auto financing. And the automobile industry has caught on to the fact they can no longer convince people to run out and buy new cars every two to three years. But they still want your money. So, they've created an alternative scheme to traditional three to five year financing. It's an auto lease, where if you use the car for work (individual or business), you can deduct up to as much as 100% of monthly payments and other expenses. While it's not right for everyone, in some situations, it's a good alternative to taking on new car debt. Of course, the best option is still to pay for cars in cash, buying a vehicle only when you really need it.

3. Electronics

In our nation's consumer-driven economy, the sale of goods is the backbone of business. So, some businesses no longer have an incentive to make quality products that last, because consumers want the latest release with updated features. Since electronics are a necessary — and rapidly depreciating — evil, your best bet is to buy only what you need, get an extended warranty on it (if possible), insure it, and hang onto it for years to come. Help drive down the excessive costs of these expensive gadgets by simply refusing to trade them in every year.

4. Furniture

Used furniture is only as valuable as what someone is willing pay, and that's often far less than what you paid originally. Even designer furniture in good condition only fetches a small fraction of its original price. If you're in the market for furniture, buy high-quality, durable pieces if you can. Budget and plan for their purchase and acquire them over time. If you can't quite afford those high-quality items yet, consider buying them used and let someone else take the depreciation hit, instead.

Are there other quickly depreciating buys we've missed? Please share in comments!