Why Do Some Cars Depreciate More Than Others?
You have probably heard that a new car depreciates in value the minute you drive if off the showroom floor. You’ve probably heard it many times in fact, but have you ever stopped and wondered why? What is more, why do some cars depreciate in value quicker than others?
Let’s investigate why.
Brand and model
Some brands and models retain their value better than others. This comes down to brand trust and reputation. If a make and model has proved itself to stand the test of time, then it will remain in demand and therefore command a higher asking price than other second hand vehicles.
Some of the brands that tend to retain value well are industry stalwarts like Ford, Volkswagen and Toyota.
The condition of the car
This one is obvious. The better the condition of the car, the higher it can sell for. People obviously want to make sure they are getting good value for their money. They won’t pay top dollar for a vehicle that has been in accidents or hasn’t been serviced regularly. Related to this is the mileage of the car. While a car can still be in good condition even if it’s been driven a lot, it does indicate that the car has been put through its paces.
Upgrades
Upgrading your car with add-ons can increase its resale value, but not always. One mistake would be to put more money into revamping the car than can reasonably be expected to make back. This is the same mistake many would-be house flippers make. For example, it can be a good idea to install a quality sound system in your vehicle because it would make it more attractive to future buyers. However, splurging on a top-the-range sound system for a low- to mid-range model probably won’t be a good investment, because it might be difficult to find a buyer willing to pay what you put into it.
Age of car
Obviously, the older a car is the more it depreciates in value. However, did you know that it doesn’t depreciate in value at a steady rate from the moment you drive it off the lot? Most of the value is lost within the first year. Therefore, if you wanted to be smart you wouldn’t sell your new car after only one year because the value lost wouldn’t be worth the use you got out of it.
As a buyer though, it would be a good opportunity to look for pre-owned cars for sale that are only a year or two old, because it will have already undergone most of its value depreciation but likely still be under warranty, with a maintenance plan.
Supply and demand
Finally, one of the biggest reasons that some cars depreciate in value faster than others simply comes down to market forces. In other words, supply and demand. If you own a vehicle that is popular with consumers in your local market, then you will get a higher price for it than a model that isn’t as much in demand.
Knowing the reasons why one car can depreciate more in value than another can help you make good choices in the future so that your car retains its value. If you buy a vehicle that is a trusted brand and model and popular in your area and you make sure it remains in good condition, then you can be sure that when the time comes to sell it you will get a fair asking price.