The sad part of even the best new cars is that they depreciate. In fact, your car loses value as soon as you drive it off the lot. However, many people don’t know what causes car depreciation. Most people know that it means you’ll get less for your trade-in when the time comes to get rid of it. Of course, many factors impact how much your vehicle is worth.
What is car depreciation?
So, what is car depreciation? According to Progressive, this is how fast your vehicle loses value over time. In a nutshell, it measures the difference between what you paid for it and how much it’s worth in the present. In most cases, this matters when people decide to either trade in their car or sell it to a new buyer. As mentioned, even the best new cars go down in value. The problem is that some vehicles shed their worth sooner than others. Many cars lose about half their value within five years.
As mentioned, several factors impact car depreciation.
Mileage causes car depreciation
As most would assume, how much you drive the car impacts how much it depreciates. In fact, this is often considered the largest factor in a vehicle losing value. On average, people drive their cars about 15,000 miles per year, which, of course, causes some depreciation for the vehicle. Going above this annual amount will cause the car to depreciate faster, as increased use means more wear and tear.
Readers should note that many sports and luxury vehicles are different when it comes to car depreciation. Some of these vehicles aren’t typical daily drivers, meaning potential buyers would prefer a model with under 15,000 miles per year on the odometer.
Gas prices play a role
Gas prices also factor heavily into the depreciation of a car. When prices are low, many people find larger vehicles more valuable. However, when they inevitably go up again, smaller models come back into fashion. Of course, the same is valid for hybrid and all-electric vehicles. Unlike mileage, this means that the value from gas prices changes over time.
Because of the uncertainty, many owners list their cars for sale when gas prices coincide with them getting more money.
Various factors
The best new cars can be impacted by several factors that cause them to lose value. Supply and demand impact car deprecation, as it does many goods and services in our economy. If you have a car that people want, you can get more money for it. However, if the vehicle is one that’s easily assessable, it will be worth less.
Readers should also know that cars with accidents on their records won’t be worth as much. This is the case because car wrecks can cause unseen damage to vehicles. Additionally, the type of car, body style, and the features it has will all impact its depreciation.
For more reading, check out our article on modifications that can increase a car’s value.
