Buying a car is a huge purchase. Unlike a house, a car is an asset that loses its value over the years. Depreciation is inevitable, but there are few ways to slow it down. Here, we’re explaining how depreciation affects a car’s value and what you can do to counter it.
What is depreciation?
Car devaluation happens no matter what as a vehicle ages and is in use. Depreciation is the difference between the actual value of the car when you buy it and its price when you sell it. Mileage, overall condition of the car, its reliability, and maintenance history have vital impacts on the vehicle’s depreciation.
What cars depreciate faster than others?
Brand-new cars depreciate extremely fast: the car starts losing its value right after the purchase, regardless of its make and model. New car depreciation rates vary from 15% to 35% of its MSRP in the first year. Note that luxury cars depreciate much faster, as they require more investment and maintenance to keep them running.
After the first year, annual depreciation continues, but slows a little to approximately 15% per year. By the fifth year, your car may have lost 60% of its value. Since specific cars have higher demand or lower reliability ratings, estimated depreciation isn’t going to be the same. Second-hand cars, on the contrary, hold their value better.
The most influential depreciation factors
There are two major factors that affect a car’s depreciation: age and mileage. The older the car and the more miles it has on the odometer, the less valuable it is. Keeping a low mileage can seem contradictory to the idea of owning a car, but you can look for rental cars if you regularly need to cover long distances.
Another important factor to take into consideration is fuel consumption. Nobody wants to drive gas-guzzling cars today, and buyers look for vehicles with higher fuel efficiency. A car that gets 30 mpg will depreciate less in the long run compared to one that gets 16 mpg, for example.
Maintenance and service help hold the car’s value
A full service history not only gives your buyer peace of mind but also helps keep track of your car’s condition. The less frequent the service, the less the value after years of driving. If you have detailed service records, you can prove that the car has been well taken care of, and that definitely helps it maintain value.
With Salvagebid you can find your next car on a budget. We have thousands of clear and salvage title cars for sale. To start bidding, you’ll have to register with us, upload a copy of your government-issued ID or passport, and place a refundable security deposit. You can fill in our online form or give us a call at +1 (360) 347-1300 (6:00 AM – 3:00 PM PST, Monday to Friday) if you have any questions.