A car may be one of the biggest purchases you make in your life, but that doesn’t mean it’s a sound investment. It’s widely known that your new car will depreciate by as much as 10-30% the second you drive it off the lot, and there’s little you can do to change that.
Car depreciation is one of life’s unavoidable nuisances, but that doesn’t mean you can manage it. There are several factors which affect a car’s worth, some of which have more impact than others.
When looking for a new car, there are several things to look out for if you’re looking to minimize depreciation and keep your car fresh. Here’s the brutal truth about vehicle depreciation, and what you can do to manage it.
Car Depreciation over Time
A new cars depreciation is always the most dramatic. The second you’ve driven a new car, even if it’s just to the end of the block, the car no longer counts as new. This will automatically shave at least 10% off the value of the car, and there’s nothing you can do to change that.
Once you’ve managed to get over this harsh fact, the decline doesn’t stop there. The first few years of driving a car are when it will experience the most depreciation. According to your average car depreciation calculator, a normal car will lose a staggering 30% of its value within the first year.
After 3 years, the average vehicle depreciation will be around 46%. Worse still, if you’ve had your car for five years, expect it to have lost a grand total of around 60% of the original asking price. The truth hurts.
Other Factors That Erode Value
It’s not just time and usage which will lower the value of your car. Some types of cars depreciate much faster than others, so it’s important to shop wisely.
Research has shown that luxury cars, such as sports cars and town cars, will depreciate more rapidly and deeply than pretty much any other type of car on the market. This may be because flashy cars are just that, flashy.
You also might want to hold off on buying a new SUV. Big gas guzzling vehicles with particularly low miles per gallon can expect their value to sink like a stone. People want an efficient, low-cost vehicle, as well as one that doesn’t scream “I hate the environment”.
Why Brands Matter
More than just the type of vehicle, the brand plays a big role in how much it will depreciate. In the US there are brands that are highly trusted by consumers, and these ones will retain value better than ones that aren’t trusted.
Examples of trusted brands include Toyota, Lexus, and Porsche, so maybe keep these in mind if you want to avoid your new car’s depreciation.
How to Manage Depreciation
To ensure your car stays as valuable as possible, your first steps should be to follow the above rules, and avoid buying cars with low mileage, low efficiency, and poor brand reputation.
If you want to know more about keeping your car in good-as-new conditions and finding the right auto repair shop for you, our regularly-updated blog has all the information you’ll ever need.
Car depreciation may be inevitable, but it’s not unmanageable.