New Car Depreciation: What it is and How to Reduce It
New Car Depreciation: What it is and How to Reduce It
Posted on October 28, 2022
If you're buying or have recently bought a new car then youāve probably heard the word ādepreciationā thrown around. Itās a big word which probably means it's important right? It is! And this article will explain what it is and how you can take steps to reduce it.
What is New Car Depreciation?
A basic definition of depreciation is that itās the value something loses all the time. Itās not specifically a car term, just a financial one generally. For our purposes though weāll focus on cars.
Depreciation primarily affects your resale value. If you're planning to buy and trade up later, itās key that you think about the depreciation.
You probably know that cars lose value over time. This is due to a couple of factors. Number 1 that as cars get older they get less reliable. The value goes down as maintenance goes up. As well as that, as a car gets older it gets outdated. Newer models will have newer gadgets and gizmos.
Thereās math you can do to calculate the new car depreciation. Luckily though, there's places that do that for you.
Thereās a whole host of other factors to consider also: Mileage, fuel efficiency, the make and model, general condition.
Not all of these can be controlled. You canāt stop the car from getting older unless youāve got some secret time control powers. But there are a few things you can do.
Things To Consider Before You Buy
Here are the things to watch out for before you buy if youāre concerned about the depreciation value.
Certain manufacturers and vehicle types depreciate slower than others. At the moment pickup trucks depreciate slower than most because theyāre highly sought after. However, that may change. There are many online resources you can use to figure out a brand's average depreciation.
The ColourĀ of your car can affect resale value too. This effect is different depending on who you're trying to sell it to though. So itās a bit difficult to factor into the depreciation value. If your car is hot pink for example. Most people will be less likely to buy it, but someone who desperately wants a hot pink car will be willing to spend higher than average.
Always remember the optional extras too. What people are looking for will change over time but if the car has things like wireless bluetooth, reversing cameras, heated seats, these will greatly affect resale value.
Things To Consider After Buying The Car
After buying the car there's still some things you can do to lower the depreciation rate.
If you are able to drive less. That will have a positive impact on the car's resale value. Since mileage is a common way to calculate a car's value. Driving less also means the carās less likely to get damaged or dinged up.
Regular maintenance can also lower the depreciation rate since youāll be able to prove on paper that the carās been well looked after.
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