How Cars Depreciate
How Cars Depreciate
With few exceptions, automobiles depreciate immediately upon their initial sale. Depreciation is a financial term referring to its loss of value over time. While some collectible or limited edition vehicles may better maintain or even increase in value, for the most part, all cars produced will experience depreciation.
This depreciation is not insignificant. Rough estimates place the immediate depreciation of a vehicle at 20-25% once it is driven off the new car lot and upwards of 50% by year five. That means that this shiny new car will be worth half of its purchase price in just five years of use.
Is there anything one can do to stop or slow the depreciation of your vehicle? Yes, you can minimize how much value your car loses each year by taking the following steps.
Buy a Car That Has Historically Maintained Its Value
Cars depreciate at different rates based on type, year and model. Some models maintain their value better than others. Do the research necessary to determine vehicles that have held their value in the following years.
Since a large chunk of depreciation takes place immediately upon a car’s initial sale, many believe in letting others absorb that initial loss. Instead of buying new, many will decide to purchase a one or two year-old pre-owned vehicle that still has the balance of its factory warranty in place.
Maintain It Properly
Keeping your car maintained properly is a big factor in keeping its value. This includes both mechanical and aesthetic care. Keep all records of all maintenance performed.
Keep Mileage to a Minimum
A big reason cars lose their value is the amount of miles that are put on them through the years. If you have two cars of the same year and model and one has 200,000 miles and the other has 50,000 miles, the car with fewer miles will have a significantly higher value, everything else being equal.
Taking good care of your car will help extend its life and pay off when you either want to sell or trade it in sometime in the future.
It is possible to have a car that is in exceptional condition insured for its real value as opposed to its book value. Many collectors and those with unique or custom vehicles do just that.
Contact one of our independent car insurance professionals to learn more. Whether your car is unique or not, we can help make sure you and your car are properly protected. Contact us for a no obligation insurance review and price quote today.
Leave a Comment