What is Depreciation?

Depreciation, in the most basic sense, is how a car loses value after you own it. The second you drive a new car off the lot, it loses value. But what causes depreciation, and why don’t all cars depreciate at the same rate? Read on to find out more.

How Quickly Will My Car Depreciate?

The average new car loses 11% of its value the moment you leave the lot. During the first 5 years, the car depreciates by 15%-25% each year. After five years, your car is worth approximately 37% of what you paid for it at the dealership.

Why Does My New Car Lose Value?

As soon as you drive it off the lot, more than 10% of the value of the car is lost. This is because you will initially pay the retail price of the car at the dealership. But once you’re on the road, the car will drop down to its wholesale price, which can amount to thousands of dollars, not to mention your taxes and licensing fees.

How Can I Prevent Depreciation?

Unfortunately, unless your car is a rare model that will fetch hundreds of thousands of dollars at auction, there’s not much you can do to prevent the depreciation of value in your car. No matter how well a driver takes care of the vehicle, it’s naturally going to lose value over time. However, there are a few things you can do to keep the value of your car more intact than it might otherwise: Avoid cars that are sold for fleet use. This includes models like the Ford Taurus. These cars run rampant on the aftermarket, and you won’t get much money back for them because they aren’t in high demand. Additionally, don’t pick an unusual color if you plan on trading in your car in a few years. Silver, black, blue, and other universally pleasing colors will help keep your resale value higher and prevent much depreciation. Staying on top of your maintenance, keeping the mileage down, and making sure your car stays in good, clean condition are some of the best ways to ensure your car retains its value.

Depreciation is an unavoidable part of owning a car. But it can help you save money if you buy a used car, and if you buy new, you can make better decisions about your purchase based on a car’s depreciation rate. Knowing the ins and outs of depreciation can help you make the best decision about your next car.

How to Choose a New Car

If you’re in the market for a new car, the first choice you have to make is whether you want to buy new or used. Once you’ve decided to buy brand new, here are five things to consider when buying your new car:

Space

The first order of business when choosing a new car is deciding how much space you need. Do you really want that cute little coupe while you take your kids to baseball practice? Think of the hassle of dealing with children in the back seat with only two doors. Additionally, if it’s just you in your home, you probably don’t need the seating space of a minivan. Whether you choose a coupe, sedan, crossover, SUV, or truck, let the space and size of your vehicle be practical for your life.

Driving Habits

If you’re constantly making long road trips on the freeway, you may want something more comfortable than the average sports car. However, if you’re using your car for short trips, or if it doubles as an autocross car on the weekends, a sportier car might be right for you. Additionally, think of your fuel consumption. Hybrids, electric cars, and diesel engines are all alternatives to conventional gasoline engines. Hybrids will typically see a savings with a lot of stop and go traffic, whereas the diesel engines will see a greater benefit during long distance highway driving.

Resale Value

If you keep your new cars for a few years and then upgrade again, considering the resale value of your next purchase can be extremely important. Many cars will hold their value quite well, while others depreciate rapidly once they’re driven off the lot. If you’re looking to keep some money in your pocket in a few years, research the resale value of the car you want to buy. It might be a make-or-break decision.

Features

If new features are important to your next purchase, like traction control or a navigation system, it’s worth researching. Navigation systems, voice control, roadside assistance, and even systems that alert you if your car is drifting into another lane are all features that are on the market now. Different manufacturers have different technology systems, so you’ll want to find one that’s easiest for you to use. If you like the car but don’t want the additional features, find out if the car is available without those options. Not only will you not have to deal with the extra technology, but it will also cut the price of your car down slightly.

Trading In

When you’re buying a new car, think about the possibility of trading in your old car. Trading in your old car won’t get the full value of the car, but it can be valuable in buying a new car. Discuss the possibility of trading in your old car only after you’ve negotiated the best possible price for you new car. Make sure you’ve researched the value of your old car before you negotiate the new one! You can also sell the car yourself to a private party, though selling it through a company will usually get more money back in your pocket. ┬áThis means that you can get a new car with more options since trading in your old set of wheels will increase your budget.

There are many things to consider when buying a new car, and these are just a few of them. Ultimately, your new car should be practical for your life, and have all the features you want as a driver. Happy shopping!

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