Log in

View Full Version : Dodging Depreciation

03-10-2019, 04:11 PM
By Eric Peters
A great deal on a new car might turn out to be less fantastic than you thought come trade-in time if the vehicle you purchased loses its value more rapidly than the average.

This loss in value over time is known as depreciation, and while all cars (with the exception of a few exotics) begin to depreciate from the moment you leave the dealer's lot, the rate can vary substantially from car to car. Some models, such as the Lexus LS sedan, have historically enjoyed lower-than-average depreciation rates (as little as 10-15 percent annually) while others, including some Mitsubishi vehicles, have suffered fairly dramatic reductions in resale value relative to the industry average.

On average, a new car loses 20 percent of its value during the first year of ownership and will be worth about 50 percent of its original MSRP after five years. A few unlucky cars (and even unluckier owners) will experience depreciation rates as high as 70 percent after five years. This is bad news no matter who you are, but if you still owe on the loan, it can be an especially hard hit. That's because you could find yourself upside down and owing more on the car than the car is worth.

Depreciation rates correlate to factors such as the perceived desirability of the vehicle (which affects resale demand and thus prices on the used car market), consumer satisfaction scores (as expressed by sources such as J.D. Power & Associates, Consumer Reports) and the vehicle's reputation for quality and reliability. The ability of a new car to hold its value can also be affected by trends in the used car market. For example, an all-new model car or truck can command very high prices during its first year or so on the market, often selling at or above MSRP sticker due to high demand. But two or three years later, when large numbers of these vehicles can be found on used car lots, it will usually cause the value of newer models of the same vehicle to drop pretty rapidly simply because there's a glut of them on the used car market and price competition is fierce.
To avoid getting sucker-punched by higher-than-average depreciation, you should always do a little research into how well the specific make/model car you're considering has held its value in the past before you make a decision about buying. Check retail/wholesale average used car prices as listed by the National Automobile Dealers Association (www.nada.com) and Kelley Blue Book (www.kbb.com). These will give you a very good feel for industry trends and alert you to cars whose value tends to plummet with unusual severity. The trade publication Automotive News is another good source.

Also, since lease costs reflect expected depreciation, you can learn a great deal about a given vehicle's ability to hold its value by looking into the cost of a lease contract for that vehicle. In general, the lower the residual value (that is, what the vehicle is anticipated to be worth at the end of the lease) the higher its rate of depreciation (and usually, the more costly the lease).

Finally, you can dodge depreciation simply by avoiding new cars altogether. Usually, the only thing you'll miss out on is that new car smell because today's cars are so well-built that a slightly used two- or three-year-old vehicle just coming off its original lease is barely broken in and ready for another 8-10 years (and 100,000-plus miles) of reliable service. Yet even though the car still has 80-90 percent of its useful life left to go, you'll pay anywhere from 20-40 percent less than the guy who bought it new.

That drive off the dealer's lot can be very expensive indeed. Sometimes, it's a lot smarter to let someone else be the first one behind the wheel!

03-10-2019, 04:24 PM
your fucking depressing me asshole:fu:

03-10-2019, 04:45 PM
depressing me too......why don't you just leave us alone...what are you, A used car salesman?