No doubt you’ve heard the old adage before, “that car will start to lose its value as soon as you drive it off the lot.” To be more precise, its value drops about 10% right off the bat. Within that first year, it will probably lose another 10% of its value. In the years following, you can expect the value to drop about 15-20% annually.
Why does the value drop so quickly? What does depreciation mean for you as a car owner? What can you do to try and sustain your vehicle’s value so that you can get a good deal when it comes time to trade your car in? Today, we’re going to dive into the topic of depreciation and try to answer some of these crucial car owner concerns.
Why Do Cars Depreciate?
There are several factors that have an influence on vehicle depreciation. The one you might be most familiar with is wear and tear. As time goes on, you rack up mileage on your car. The more miles, the more likely there is to be damage to the vehicle.
Interior issues like tears in the upholstery, mechanical problems like the brakes, or even exterior damage from minor accidents start to add up, and even if you get them repaired, they all factor into the car’s history.
While this is certainly a big deal, it doesn’t count for all the depreciation that occurs. There are subtle economics at play too. Think about it; new cars are being rolled out at a constant rate. The second you drive off the lot, there’s already something newer, better, and more attractive for potential customers to choose from.
If the car you bought is still popular in a few years time, there’s a chance that it will retain a good deal of value. Toyota Tacoma’s, for instance, are known for being reliable and highly sought after even when used. As a result, you’ll likely get a good amount in resale—more than you might with other models.
On the flipside, check out the least popular car listing. These cars are more likely to lose a larger portion of their value because the demand for them is lower. Of course, knowing what’s going to stay popular in the years to come is a difficult task, so what should you do to make sure that your resale potential stays high?
The answer is to carefully consider the factors that are within your control. You can keep your car in good condition by driving normally and avoiding accidents to the best of your ability. Maintain your vehicle regularly, and if you don’t have the skills to do it yourself, take it to a talented mechanic who can.
Keep the interior of your car clean. Get it vacuumed, use floor covers to keep the bottom from getting damaged, keep the upholstery unmolested, etc. If you have pets, keep them off the seats if you can, or invest in covers so that your seating stays in good condition.
When selecting a car that you think you might resell, go for something with utility, great fuel economy, or both if you can. A used car’s value holds better if it has a purpose or feature that is particularly attractive.
For vehicles like pickup trucks, that purpose is hauling stuff in the truck bed. For highly fuel efficient cars, that purpose is saving the owner money on gas.
In addition to this, make sure you get the right features that will add to your car’s attractiveness. They may cost you more upfront, but they will also net you more when it’s time for resale, and go a long way to a trade-in on a newer vehicle.