Of all expenses related to automotive ownership, depreciation is one of the most sizable—especially when buying new vehicles. It’s been said that a new car loses about 20% of its value the minute it’s driven out of the showroom.
While depreciation is unavoidable, buyers can mitigate their losses. From focusing on the resale value when shopping at car dealerships salt lake city to scheduling regular maintenance, here are the basics of depreciation and a few tips on reducing it before and after the sale.
What Is Depreciation, and How Does It Affect Me as a Vehicle Owner?
Depreciation is the rate at which a car’s value drops with time. Several contributing factors exist, including features, wear, and tear. All vehicles depreciate at varying rates, and you’ll need to do some homework to see how much your car, truck, or SUV is worth.
Pick the Right Brand and Model
Whether you’re shopping for a new or used vehicle, focus on those that maintain their value. Cars with low operating costs, good efficiency ratings, and reputations for safety and reliability tend to hold their value longer, as do those from award-winning manufacturers. With a focus on these qualities, you’ll cut depreciation and put more money in your pocket when it’s time to sell.
Research Comparables
As in the real estate industry, comparable values are crucial in automotive sales. If you’d like to know how much your vehicle will be worth in a few years, research previous model years’ resale values. Sites like Kelley Blue Book offer a wealth of information and can help minimize depreciation by giving you an idea of what your ride may be worth down the road.
Choose the Color Wisely
While car color has no effect on insurance premiums, it does, in part, determine depreciation rates. Silver, gray, black, and white are perennially popular, so they hold their value longer. Conversely, a car with a flashy custom paint job may look dated after just a couple of years. While car color is a personal decision, it’s important to keep it in mind when choosing vehicles and considering depreciation.
Lease or Buy Pre-Owned
Buying a used car—even one that’s just a model year or two old—can reduce depreciation significantly. New vehicles lose about 30% of their value at the end of their first year on the road, and buying pre-owned lets the previous owner take the depreciation hit.
Leases include depreciation costs, and it’s possible to turn a profit if a vehicle’s resale value exceeds the lease-end buyout price. Consider your budget carefully before deciding whether leasing or buying a used vehicle is best for you.
Choose a Vehicle With a Transferrable Warranty
New vehicle warranty coverage is impressive, with some plans lasting up to seven years. What many fail to realize, however, is that most warranties only cover a vehicle’s first owner. When shopping for a new car, choose one with a 100% transferrable warranty that adds value to a potential resale.
Be a Safe Driver
Accidents—regardless of severity—necessitate repairs that accelerate depreciation. When auto accidents are reported to insurance carriers, they’re added to vehicle history reports. The information contained in a history report may reduce value and make a vehicle more difficult to sell.
Schedule Maintenance Regularly
Car buyers and dealers who accept trade-ins want reliable vehicles, not those with a history of misuse and neglect. Schedule service at the manufacturer’s suggested intervals and keep all receipts. With good maintenance records, you’ll beat depreciation and make your vehicle more valuable.
Minimize Mileage
We all love to drive, but the chances of accidents and mechanical breakdowns increase the longer a car is on the road. By minimizing mileage to the extent possible, you’ll lessen the effects of depreciation and preserve your vehicle’s resale value.
Clean It Up and Keep It Fresh
From regular washes and vacuuming to the generous use of deodorizers, keeping your vehicle fresh and clean will delay its depreciation. Avoid eating, drinking and smoking in your car and consider parking in a covered garage to increase its resale value and keep it looking newer for longer.
Choose Car Modifications Carefully
Are you considering upgrades to your car’s engine or sound system? While these add-ons may improve the fun factor, they can reduce a vehicle’s value and make it less appealing to potential buyers. By keeping non-standard upgrades to a minimum, you’ll ensure your car’s continued resale value without giving up too much freedom of choice.
Timing the Sale to Align With Market Conditions
Research the market before putting your car up for sale. For instance, you may get less for a drop-top during the winter than in the summer, and you’ll surely get less if your model has been discontinued or updated. When owners time their sales carefully, they reduce depreciation and get the highest possible prices for their vehicles.
Sell It On the Private Market
While trading in or selling to a dealer is the easiest and fastest way to profit from automotive ownership, it typically comes at a much lower price than selling privately. While selling to an individual helps you avoid dealer-related depreciation, it may take a little longer—so it pays to be patient.
Depreciation is Part of Responsible Vehicle Ownership
Auto owners face numerous costs, with depreciation being one of the most notable. Along with decreases in value, you’ll pay for fuel, insurance, maintenance, and repairs. Knowing the total cost of ownership will help you save more in the long term.
The Takeaway: Wise Choices Delay Depreciation
Of all the tips on this list, we’ve saved the most important for last. To minimize depreciation, keep in mind that every vehicle-related decision you make will affect its value. While depreciation is an unfortunate and unavoidable part of vehicle ownership, there are many ways to keep it under control. By choosing brands, paint colors, and modifications wisely, maintaining your car regularly, and selling at the right time, you’ll preserve your car’s throughout its time on the road.
