Car depreciation might not be the first thing you think about when shopping for a car, but it’s usually not a problem until it is time to sell your vehicle.
However, even if selling your vehicle is not in your immediate future, knowing what could happen if you do sell is beneficial. You should also have a good estimate on how long a car you own will last if you make a purchase.
Here is what you should know about it.
So what does “car depreciation rate” mean?
Depreciation is the decrease in the value of something over time.
Depreciation on a car, especially, is known for the significant depreciation shortly after it is driven off the lot. On average, a car will lose 22% or more in value within the first 12 months of ownership.
Although the full effect of your car’s depreciation is not realized until you sell or trade it in, you should be aware of this issue when you make a purchase. Yes, a car is a valuable asset, but its value decreases over time and is affected by other factors.
Learning more about this and what you can do to reduce your exposure will help you make an educated purchase decision.
What impacts the car depreciation rate?
You determine the rate of depreciation by many factors, including the car’s make and model, mileage, and condition.
These items will tell you what you need to know.
Vehicle condition
The condition of a car depends on its maintenance and appearance. It includes wear and tear of mechanical parts, the interior, and any damage to the exterior.
The vehicle’s condition may be classified as poor, fair, good, excellent, or excellent.
Kelley Blue Book, the top vehicle valuation site, has a vehicle condition quiz you can complete to determine where your vehicle falls.
A vehicle that you take good care of will not lose any of its value and will have a better value.
Mileage
Mileage alone is not responsible for a vehicle’s depreciation in value. Rather, it is the wear and tear of constant driving and use that makes it lose value over time.
When you drive, the mechanical components of your vehicle deteriorate. They become worn and, as a result, degrade your car’s condition over time.
The decrease in value from use accounts for the lower cost of used cars.
Make and model
Some brands are best known for making reliable cars. Depreciation is impacted by factors such as make and model.
If a car has a proven track record for quality and reliability, it will fare much better wherever it is driven than a model known for breaking down on a regular basis.
Least depreciating cars
When buying an SUV, you should be aware of which cars tend to last longest and which don’t hold their value well.
This list from Auto Guide ranks the top ten cars with the lowest depreciation rate over their lifetimes. The cars offer the highest worth of all, so they offer the lowest depreciation rate.
If purchasing a new vehicle is in your future plans, and you want to find out what will be the least expensive option over time, consider one of these lowest depreciation vehicles.
Fastest depreciating cars
Not all cars hold their value well. Some tend to depreciate more quickly than others.
Many of these vehicles are from luxury brands. While they may look great for a while, they might not be worth the hefty price in a few years.
Leverage a car depreciation calculator
Car depreciation can be confusing to calculate. After all, there are so many factors that influence depreciation. Ultimately, you should ascertain the price of the car compared with what you paid.
You don’t have to worry about the math. In fact, you can use a car insurance calculator that can assist you estimate your automobile’s value.
Use the options below to help:
State Farm calculator
Use this car depreciation calculator to see how much you will lose in value after the first year and over the time that you own your vehicle. It’s simple and provides a quick answer.
CarEdge calculator
An advanced depreciation calculator that is slightly more detailed. It includes things like make and model to help you estimate value more accurately.
Omni Calculator
The Omni Calculator for vehicle depreciation is one of our favorites. It measures the value of your vehicle for 1 year, 2 years, 3 years, etc.
Key tips to minimize car depreciation rate
Depreciation is inevitable, but you can do a lot of things to slow it down. Here are some suggestions to help you maintain your car’s value.
Invest in cars that hold their value
The best way to minimize depreciation is to purchase smart. This means buying cars that hold their value. You can search for top vehicles with the best resale value listed by Kelley Blue Book by examining the highest end vehicles.
If not one of them appeals to you, you can look up the resale value of the vehicle you want to determine the average price and if it is worth the money.
Buy a used vehicle
When deciding on a car to purchase, consider used vehicles instead of a new vehicle.
Because a vehicle has depreciated in value, purchasing used is more economical than buying new. Purchasing used makes automobile-purchasing more affordable.
According to Lending Tree, the monthly payments for new cars are $644 compared to $488 for used cars. You save this difference when paying down debt or saving money, allowing you to cover more expenses with the money you saved.
Lease your vehicle to avoid car depreciation rate
If you wish to avoid depreciation entirely, you may opt to lease a car rather than owning it. Leasing is essentially renting a car for a certain period of time and number of miles.
This mode of transport has restrictions. So before you agree to the contract, make sure you consider all of your options. Doable to lease or buy a car?
Keep up with scheduled maintenance
Maintaining your car’s condition is an important consideration when determining its value. You should therefore create a maintenance schedule for your vehicle.
You should include oil changes, tire rotations & replacements, and tune-ups (always be sure to add these fees to your budget) when creating a car sinking fund. This is a good way to save money on these expenses.
Additionally, track your vehicle’s maintenance as part of your vehicle’s daily records.
Limit the mileage
Traveling extensively can exponentially increase the wear and tear of your automobile. To reduce this, consider implementing carpooling, public transportation, or walking as a regular part of your weekly routine.
These small decreases in usage can make a big difference in the life and worth of your vehicle.
Other things to consider when you purchase a car
As you can see, there is more to purchasing a car than simply what the eye can see. Fuel economy, safety, and price are important factors, but so is how quickly the vehicle depreciates.
You should also remember the fact that the upfront costs of a car are ongoing expenses. For that reason, consider these tips to save on automobile expenses.
Understanding how car depreciation rate works can help you save money!
Now you know about all the options available, including the most inexpensive cars and the fastest depreciating vehicles. Remember to protect your car and be mindful regarding its mileage and routine maintenance so as to preserve its value.
A reliable vehicle is a great purchase, and reselling the vehicle after buying it with the least depreciation is one of your smartest investment choices.
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