new cars depreciate

Why do New Cars Depreciate So Fast?

Brand new cars have that smell of being unused and the number 0 on the amount of miles it has accumulated. It’s a wonderful feeling to be the first person to own a vehicle and it’s all yours. But, there’s a growth of buying a used cars because it is cheaper than a new car while also still being effective in its job. If you look at the vehicle’s inaugural price and how it declines over time, some will be surprised how quickly the value drops. It is called depreciation, the decrease of a vehicle’s worth over a period of time. The longer one owns it, the more value is lost.

New cars depreciate fast for a few reasons. One is just the new owner signing the paperwork and driving it off the lot. One mile driven and 5% of the value is gone. It is officially a used vehicle. Second, is the type of vehicle and its maintenance needed. Reliability and the cost of keep a car functioning plays a role in eating out what the car’s overall value is. Sedans and luxury cars are at the top of depreciating vehicles such as BMWs, Volkswagens, Mercedes-Benz, and Buick. They are mainly American and European cars, which is why Japanese vehicles have the most value overall.

Next, when it comes to why new cars depreciate, is the condition of the car and its history. If there has been any type of accident or excessive mileage, the value takes a big hit. Any type of breakdown with the engine, brakes, or tires also affects the value. The age is a factor, even if it’s just within the first four years of production. Most of the value is depreciated within the first year alone and goes on down. Supply and demand is another common factor for the fast depreciation of cars. If there is no demand for one such type of vehicle, the cost is depressed if you offer it.

Car dealerships who specialize in selling used vehicles get them from car manufacturers or directly from drivers at wholesale prices. They have to then sell those vehicles for a profit and they always don’t get a new vehicle for the reason mentioned earlier. What the car’s history isn’t up to them, they have to make due with what they got with that vehicle. The only ones with the advantage are the new dealerships because they understand the business. Nothing is really new unless it is never used.

A new car is like a new iPhone or laptop. New ones are expensive and people could go with the older version, even just one year older. People understand the value drops immediately after you buy something new. So, for new phones or cars not bought upon release and with a backlog of them as the next version is soon to be released, the value of the current version goes down. There is always the money factor for each individual and the psychological factor of keeping with the cutting edge of technology. For new cars and anything of the newer brand, they will always drop in value drastically.