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How to Use Car Depreciation to Your Advantage

Updated: Jan 20, 2023

Depreciation of vehicles: what is it, and how can it be slowed? In this article, you will learn about car depreciation in detail. I hope you'll find it helpful. So, Let's Start!

Car Depreciation

There's no guarantee that the future value of an asset will equal the price you paid for it today. A purchase does not automatically guarantee a positive return on investment. This is especially true for automobiles. Depreciation is the gradual decline in worth that a vehicle undergoes over time. Rapid depreciation occurs when a car is driven away from a dealership. Wear and tear reduce the car's resale value over time.

Car Depreciation Can Be Influenced By Several Factors:

  • The manufacturer and model of the car.

  • Indicative of the year of production.

  • Take the booming second-hand auto market as an example of the effects of supply and demand.

  • Your car's current mileage.

  • Whether or not there has been an accident or significant repairs to the vehicle.

  • Details on the car's history, including the number of owners and the vehicle's current condition.

  • Considerations of reliability, security, and popularity.

Tips to Slow Down Car Depreciation

Unless it's a classic or collector's item, the value of your car will go down with time. However, there are some strategies you can employ to slow your car's depreciation. You can do certain things to slow the rate at which your car loses value. These are just some of the options available to you:

Long-Term Car Care:

  • Reduce your annual mileage as much as possible.

  • Tend to your vehicle and get any necessary repairs done quickly.

  • Spoilers, overly large wheels, and fender flares are unnecessary changes that should be avoided.

  • Add extended warranty coverages to the life of your loan to help significantly lessen the depreciation hit.

When Purchasing a Car:

  • Buy a used or reasonably new car if you want to escape the biggest hit to your wallet.

  • Check out how much previous models and vehicles with identical features and specs have depreciated on the new vehicle you’re about to purchase.

  • Executive cars benefit most from shiny paint and leather, while regular vehicles can use a built-in sat nav and air conditioning.

When Selling a Car:

  • Consider seasonal demand when you’re going to sell; for instance, convertibles in the summer and 4x4s in the winter.

  • If you plan to sell your car, it's best to stick to conventional colors (black, white, gray).

  • Take good care of your vehicle; purchasers will appreciate knowing everything that's ever been done to it. Keep track of your vehicle's receipts and service records; instead, maintain a centralized location for them all.

Slowing Car Depreciation

How to Use Car Depreciation to Your Advantage?

Despite current trends toward ever-increasing prices for pre-owned automobiles, the value of your car will inevitably decline over time. A car's depreciation might work to your advantage if you are well aware of how to handle it.

If you’re looking to save thousands of dollars, it’s best to keep your car for the long-term and avoid purchasing a new vehicle until necessary. When you go to purchase a new car, you will incur larger depreciation costs as opposed to benefiting from the reduced depreciation hit when you keep a car for the long term. Basically, when you trade, you start all over again with a higher rate of depreciation and interest along with having to pay sales tax on the new vehicle.

Did you know car manufacturers spend billions in advertising to convince you to trade early and often? Ads sell cars! You want to put yourself in control of your trade cycle, NOT the car manufacturers. To do this it’s also recommended that you get an extended vehicle service contract, so that you can keep your vehicle longer without worrying about parts breaking or expensive repair bills.

The value of a vehicle will always decrease with time, but here are steps you can take as a buyer or seller to maximize your profit. Follow these guidelines to keep your vehicle in peak condition and maximize its resale value!

For more tips on refinancing, vehicle ownership, credit unions, and much more check out these articles where we answer all your questions.

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