How does depreciation work? And how do the effects of depreciation differ when buying a used car versus a new car? Understanding depreciation can help you make the best decision when picking out a vehicle. The car you choose can have a significant impact financially not just right away, but years down the road – for better or for worse!
At Tillema Auto, we understand that buying or selling a used car involves many considerations. And depreciation can be one of the most significant factors! This article aims to shed light on what depreciation is, how it affects car values, and what you can do to mitigate its effects.
What is Vehicle Depreciation?
Vehicle depreciation refers to the decline in a car’s value over time. From the moment a new car is driven off the lot, it begins to lose value.
This initial drop is often the steepest. In fact, within the first year, new cars lose about 20% of their value, according to Progressive. From there, they go down in value about 15% per year, until steadying out around year 4 or 5.
Factors Influencing Depreciation
What factors influence how quickly a car depreciates? Here are a few:
- Age and Mileage: Age and mileage are two of the most significant determinants of depreciation. Kelley Blue Book estimates that in the first 5 years, most cars lose about 60% of their value. Higher mileage indicates more wear and tear, which can accelerate depreciation.
- Make and Model: The brand and model of a vehicle play a crucial role. Luxury brands like BMW often depreciate faster due to higher maintenance costs and lower market demand. In contrast, brands known for reliability, such as Toyota and Honda, tend to hold their value better, says a 2024 award for best resale value.
- Condition and Maintenance: A well-maintained car with regular service records will depreciate more slowly than one with mechanical issues or visible damage. Keeping up with maintenance can significantly impact a car’s resale value.
- Market Trends: Changes in consumer preferences and technological advancements can also affect depreciation rates. For example, the rising popularity of electric vehicles may influence the depreciation rates of traditional gasoline cars.
Impact on Used Car Pricing
For buyers at Tillema Auto, understanding depreciation can be advantageous. Used cars have already undergone the steepest part of their depreciation curve. This means that they tend to offer better value compared to new cars.
When you understand depreciation and its affects, you know that you can purchase a high-quality vehicle at a fraction of its original cost.
Mitigating Depreciation
Whether you buy a new or used vehicle, understanding depreciation can also help you to mitigate its affects. In other words, proper care of your vehicle and good buying decisions will help you get the maximum value back whenever you decide to move on to your next model.
While depreciation is inevitable, here are some strategies to mitigate its impact:
- Regular Maintenance: Keeping your car in good condition through regular maintenance can slow down depreciation. This includes timely oil changes, tire rotations, and brake checks.
- Choosing Reliable Models: Choosing a vehicle that’s known for durability over time can help to lower depreciation rates. Brands like Toyota and Honda tend to hold their value well.
- Mindful Usage: Limiting mileage and avoiding unnecessary wear and tear can also help retain a car’s value over time.
Find Your Next Used Vehicle at Tillema Auto
Understanding depreciation is key to making smart decisions when buying or selling a used car. At Tillema Auto, we prioritize transparency and customer education to make sure that you get the best deal possible. Before going on the lot, every vehicle is thoroughly inspected by our reliable mechanics, which ensures that you get to pick from a collection of high-quality options.
Whether you’re looking to buy or sell, knowing how depreciation affects car values can help you maximize your investment and drive with confidence. Buying a used car allows you to skip the most significant years of depreciation, keeping more money in your pocket.
Ready to find your ideal car? Check out our vehicle inventory online, or stop by and visit us!
