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.