Sharp, Then Gradual: The Harsh Reality of Vehicle Depreciation

Sharp, Then Gradual: The Harsh Reality of Vehicle Depreciation

Follow these few simple tips and fight the undertow of your car’s devaluation.

They say that your vehicle drops in value the moment you drive it off the lot. It makes sense. Why would someone pay you full price for the same vehicle they could purchase from the dealer — a seller with more assets and consumer protections? The short answer: they wouldn’t. And neither would you.

Most analysts agree that your vehicle drop in value roughly 10% the moment you take ownership. It then drops by about another 12% within the first year. That means from day one of the purchase through the first year of ownership, you’re looking at about 22-25% depreciation. Thankfully that number wanes to about 12% annually after the first year.

So what can you do to fight the degradation of your vehicle’s value?

Here are a few simple considerations for fighting normal devaluation:

Take care of your car: By far the most important factor. Most people spend as much time in their vehicle as they’ll spend wakeful hours in their home. Keep it clean, maintained, and running smoothly. That means oil changes, tire rotations, tune-ups … the whole nine yards. It’s a big purchase, take pride!

Vehicles with added features: Leather, heated seats, and a huge moon roof will slow vehicle depreciation — but it will also increase the original purchase price. Suppose that going up a trim level or two increases the vehicle price by 5%, but makes it depreciate 1% less per year. When you sell will dictate whether added features amount to a financial gain or loss.

Aftermarket accessories: In short, they’re nice to have, but don’t expect them to add value to your vehicle. They’re great for personalization, but by definition, your ideal personalization will be different from that of other potential buyers. Save yourself the grief and headache and assume that any future buyer will ditch all your accessories the minute the car becomes theirs.

Consider color: The same goes for loud, off-the-wall paint jobs. Most people won’t think twice about purchasing a black, white, red, or blue pre-owned vehicle. But bright pink or lime green? That might scare off more than a few buyers.

The upside, of course, is that there’s really no reason to sell your vehicle immediately after purchasing it. The objective, then, is to slow the vehicle depreciation as much as possible.

Unless you’re planning on handing it down to a child or relative, you’ll want to retain trade-in or resale value. Even if you do hand it down, retaining value could reasonably extend the life of the vehicle in many cases. Protecting your investment makes good fiscal sense in any case.

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