Depreciation single-handedly makes auto loans the worst debt ever. Losing about 10% of your car’s value the minute you bring it home is certainly insane. If your deposit is less than that, your loan is already upside down. In the first five years of your ownership, time alone can chip away more than half of your vehicle’s worth — regardless of its mileage and accident history.
Car depreciation is a reality; however, not everything you think you know about it is true. You don’t necessarily have to transform yourself into a full-blown auto expert, but it pays to understand a great deal about it, whether you already own a vehicle or are just planning to shop around, according to Blossomchevrolet.com.
For starters, get these falsehoods out of your way:
All Vehicles Depreciate at the Same Rate
Age isn’t the only factor that affects the depreciation rate of vehicles. The reason the concept of depreciation even exists today is that buyers feel differently whenever purchasing a used vehicle. Some are happy to pay top dollar for a certain model, while others are less keen about owning a particular ride.
This is the reason secondhand crossovers are generally more valuable than bona fide SUVs. The former tend to have better fuel efficiency than the latter, which is why you’d find the likes of a used Chevy Equinox in Indianapolis, Milwaukee, and any other U.S. city a little bit costlier than their sports utility wagon counterparts because they promise to save you on gas consumption down the road.
Repairs Restore Market Value 100%
There’s no denying that road collisions can drop the vehicle value profoundly, but repairs can’t erase history. Even if your ride looks again and runs like it used to be, you can’t convince another person to buy it at a price of a similar vehicle that have never been involved in an accident.
The damage is forever done if your vehicle is caught in a crash, value-wise.
Depreciation is Always Worth Considering
Familiarizing yourself with car depreciation concepts is a mark of a smart auto buyer, but such information may not always come into play. It’s good to worry about depreciation if you only plan to keep the vehicle in less than five years because of its future resale value, but it’s less of a factor if you intend to use it over the long haul.
There’s no escaping car depreciation; and with its serious financial implications in mind, your knowledge about it should guide you toward your purchase.