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AUTO DEPRECIATION
A
new car purchase is a big purchase, but in
the long-run, a bad investment. Why? New cars
depreciate in value the second the leave the
dealer's parking lot. In fact, even though your
car is still brand new, once it leaves the lot,
it is considered a
'used' vehicle!
What are the depreciation rates of cars?
Typically depreciation of
new cars is 15% the
first year, and about 5-9% every year after. The
rate of depreciation is going to depend on what
make and model of car you have. Some cars hold
their value better than others. For example, a
three years old Porsche is going to depreciate at
a lower rate than a three year old Honda Accord.
You can use our
car depreciation calculator to determine what
your car is worth, or will be worth.
What can I do to minimize the impact of
depreciation?
The tips below should be followed when buying
a car.
-- Buy a car that is one or two years old. These
cars will still have a warranty, but will be
significantly less in price than the same car but
new.
-- Purchase a car that is part of a dealership's year end sale, or model
run out. You will get a good price on a car when
dealers try to unload.
-- Dealers often offer 'drive-away' deals. This means you can buy a car,
drive it off the lot yourself without having to
pay delivery and registration fees.
-- Certain cars hold their value better than others. For example, a
$60,000 vehicle that retains 70% of its value
after three years will be worth $42,000. You will
lose $18,000 if you decide to sell this car at
this point. On the other hand, a $45,000
car at 65% after three years is worth $29,250.
Meaning you lose $15,750.
-- Buying a car that has a strong reputation as a reliable car will help
your resale efforts.
-- Certain after market options impact the a car's depreciation. For
example, if you choose a 6 cd changer over air
conditioning, you are likely going to get less
money than your car is even worth since most
people would choose air conditioning as a
necessity.
The tips below should be followed when selling
your car.
-- Make sure that you service your, preferably twice/year. Keep records
of all your servicing so that you can support
your vehicle's maintenance history to any
potential buyer.
-- When you are not driving your car, try and keep it stored in your
garage.
-- Wash and wax your car routinely. Try and keep the inside clean and
well maintained as well.
-- Repair any small dents and scratches. The cost for repair will be less
than the amount you would lose as a result of
these small damages.
More Car Buying Advice:
You don't have to buy a spanking brand new car to get
the 'best of the best'. You can
buy a certified pre-owned car coming off a lease that
will not only get you the car you want, you will be
covered by the warranties that come with purchasing
'pre-owned' vehicles. |