A car is by far one of the best investments you can make… if you’re looking to lose money at a significant rate. Why? It all has to do with a devious little thing called “car depreciation,” which is a fickle mistress that can leave your car feeling insecure and worthless.
On rare occasions, it can be gentle and slightly generous, but it will almost always beat the living pennies out of anything with four wheels and an engine. Worst of all, it won’t even give you a head start—the second you drive off the lot, it attacks the value of a vehicle like some kind of bad-mannered beast.
Don’t freak out, breathe, and with a hope, a prayer and a big ol’ bowl of our finest fresh-baked wisdom, you might be able to stop the money-hungry monster from feeding off your vehicle’s worth.
Yes, this is true. The second you drive a new car off the lot it will depreciate by as much as 11% of its value, and can lose up to 30% in the first year. Stupid, right?
For the most part, they’re just rough guesstimates. There are too many undefined factors like the perceived condition, gas prices, and trends that can screw up the numbers for everyone, so most use averages to get you in the ballpark.
Out of all the calculators we tried, our favorite was the Edmunds TCO® calculator.
There are a number of reasons, but the two biggest are reliability and popularity; it’s all that “supply and demand,” Econ 101 stuff. If no one wants it and it runs like garbage, its value will plummet. However, there are several constants that will cause a car to continually trend down.
If you’re going to keep your car for 7+ years, you can back-burner your worries. If you’re planning to upgrade every couple of years with financing, you should probably do your depreciation homework or you’ll be eating a steady diet of green. (Money. Not salad.)
It’s impossible to stop the depreciation train from crushing your vehicle, but there are steps you can take to slow it down.
There it is, a bunch of thrilling info to get you all kinds of excited about buying a brand-new car. On the other hand, some of the info may have swayed you into buying a used vehicle. Either way, we hope we thoroughly educated you on the ins and outs of car depreciation.
Good luck, and may your decisions be smart and financially responsible.