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How Depreciation Affects your Car’s Value

1/27/2020

 
​A popular belief is that as soon as you drive your new car off the sales lot, it loses value.  This is a true statement, as cars usually lose about 20% of their value within the first year and up to 60% within five years. The rate that the vehicle loses value is called depreciation.

What Affects the Rate of Depreciation?​

Depreciation is the monetary toll that several factors take on the value of your car.  Some of the factors are how old the vehicle is and how many miles are on it.  The rate varies between makes and models of cars, as some hold value regardless of mileage and age.

The effect mileage has on your car depends a lot on what car you are driving.  A fancy sports car with 15,000 miles on it in a year would be considered a high amount of mileage because that isn’t a car that most people drive often.
However, a mini-van with the same mileage would be considered an average amount of miles.  A car with more miles than is average for its type will have a higher rate of depreciation.

Another way the make and model of your car affects depreciation is that cars in higher demand when they are new often hold their value longer than other cars.  Also, cars in states with warmer weather are often in better shape than cars from cold weather states due to salt damage.

​If your car is one that people consider to be more reliable, it will usually keep its value longer, too.

How to Slow the Rate of Depreciation

​While many of the factors that determine the rate of depreciation on your car are out of your control, there are a few things you can do to lower that rate.
  1. Try to limit the mileage you put on your car.  
  2. Keep up with the routine maintenance recommended by the manufacturer.
  3. Keep your vehicle clean – inside and out – and wax it regularly.
  4. Accidents will lower the value of your car.
When you are purchasing a vehicle, it does little good to try to guess what type of car will hold its value.  Purchase the car that suits your needs and desires and don’t try to purchase one that will depreciate slowly.

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