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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.



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