In simple terms, depreciation is a rate (or pace) at which a car loses its value over time. You have definitely heard a statement that a new vehicle loses its value by twenty percent when it just leaves a dealer.
Car depreciation is a term that everyone should be acquainted with when buying or selling a car. Specialists say that a new vehicle will lose around sixty percent of its value after 5 years of using it.
It is almost impossible to state the exact depreciation value as it highly depends on the model and configuration of the vehicle itself. The following section depicts the major factors that influence the depreciation of a vehicle.
Mileage and age
These are the main factors that have an enormous impact on depreciation. Due to the fact that automakers come up with new models every year, older versions become less valuable. The same goes for mileage.
The more mileage your car has, the less valuable it becomes. The only thing a car owner can do to fight depreciation is not to put a lot of miles on the vehicle. However, this is quite difficult for some people as the main purpose of owning a car is to drive it.
The more mileage your car has, the less valuable it becomes.
Depreciation is also a major aspect when it comes to leasing cars. It can be explained by the fact that the monthly lease payment is extremely related to the depreciation of a vehicle over time of a lease agreement.
You also have to understand that ‘high mileage’ varies among different models. To make it more clear, let’s take an example of a sports car like Lamborghini Aventador. 15,000 miles per year for this car is considered to be a lot and the risk of an accelerated depreciation increases significantly. This is normally due to the case that this type of car is not aimed for an everyday drive.
Breaking down depreciation
There are also other factors that have an influence on the cars’ depreciation rate. Supply is one of them. You should keep in mind that if the demand for the car is higher than its supply, the depreciation rate will slow down and visa versa. Specialists say that cars that hold their value best are not the ones that are offered in high quantities for daily rental.
In the majority of cases, dealers have big incentives when you want to buy a new car or decide to lease a car. Even though these incentives might save you a lot of money, especially when leasing a car, it might a problem for you when you decide to get rid of the vehicle.
It is also a well-known fact that weather conditions highly affect the depreciation rate. Typically, when the car is utilized in a warmer climate it remains in better condition, which in turn slows down the depreciation rate.
It might be a surprise for you but consumers’ perception has a crucial effect on depreciation. Some vehicles are just believed to be more reliable, valuable and desirable. All the aforementioned also impacts the way cars depreciate over time.
Some vehicles are just believed to be more reliable, valuable and desirable.
If you are planning to keep upgrading your cars every few years, depreciation will become a major factor affecting your decision of whether to buy a new or used vehicle. At the same time, if your intention is to buy a vehicle and keep it for a long period of time, then depreciation will not play a huge role in your buying decision process.
If you are a fan of brand new vehicles but you do not want to spend a lot of money straight away you can also consider car leasing. This is the case where depreciation of the vehicle plays a major role and will be a major factor affecting your monthly lease payments.
Taking everything into consideration, it should be said that it is almost impossible to have control over the depreciation of a vehicle. Market factors are something that is out of control of a regular consumer. The future value of a car is determined by the market and automakers itself.
Amelia Grant believes that information is a great force that is able to change people’s lives for the better. Check out her website and blog for more.
Author: Amelia Grant
Amelia Grant is a journalist and blogger that believes information is a great force that is able to change people’s lives for the better. She has a strong passion for sharing useful and important things about health self-care, wellness and other advice that may be helpful for people. She is an enthusiast of a healthy lifestyle. You can check out her website for daily updates at Amelia’s Blog.