Getting a new vehicle is exciting, from the new car smell, the polished interior, and the fancy features of a new model. What isn’t exciting is the inevitable car depreciation that doesn’t just happen but happens almost as fast as the speed of light. It doesn’t matter what you do; buying a brand new car will always take a depreciation hit. One way to slow the rate of depreciation is to purchase a used vehicle instead of a brand new one from a car dealer.
Whether car buyers purchase a new or used car, buying from a dealership will always cost more because those dealerships have to cover overhead costs such as a showroom, staff, fancy lighting, etc. The higher the purchase price of the vehicle, the greater the depreciation. Buy your next car or first car from FFUN Cars, and you’ll save on depreciation costs by not buying from a traditional dealership.
The Rate of Depreciation
It’s a no-brainer that depreciation is an unfortunate reality of buying and selling a car. The exact rate at which a car depreciates depends on a few things; however, on average, brand new vehicles lose 20% of their value in the first year, then 10% every year after. The biggest kick in the throat is out of that 20% in the first year, anywhere from 5% to the entire 20% of the value of the car can be lost the minute you drive off the lot, according to Instamotor. Some will even argue that you don’t even have to get in your fancy new ride and roll off the car lot, but rather cars lose value as soon as you sign the dotted line. We consider ourselves car experts, and it doesn’t even make sense to us. It’s the psychological aspect of the next buyer not being the first-time owner.
Cause of Depreciation
As already mentioned, there is psychological reasoning as to why new cars lose value. On the more logical side of things, as kilometres on the odometer increase, so does the probability of the vehicle needing repairs, which contributes to the decrease in value. A vehicle goes from new to used in the same amount of time it takes for you to sign your name, deeming it an old car. As you purchase the latest model of a specific car, the next (even newer) model is just around the corner, waiting to be shipped to dealerships. There is the perception that the newest of the new model has upgraded features, making even a vehicle from the previous year less valuable.
It seems gas prices are affecting everything, and resale value is included. At one point, SUVs, sports cars, and pickup trucks were the most sought-after vehicle types and came with an almost guaranteed high resale value. If you own an SUV or truck, you can thank the fuel cost for that as car buyers are hunting for fuel-efficient vehicles or electric cars. Don’t get discouraged, there is still a market for these body styles, and to find out the value of your car, whether your want to sell it or trade-in, use our handy-dandy technology to see the market value in minutes.
Minimize Depreciation
Okay, yes, your car is going to lose its value over time, but there are things you can do to minimize the drop in value. We feel like this doesn’t need to be said, yet it does for some. Take care of your new vehicle. That doesn’t mean just washing it and giving it the occasional vacuum. Actually take care of it, meaning, take it in for routine oil changes and servicing. Pro Tip: hang onto any service records, as it’s great to be able to show potential buyers when you want to sell it.
This may sound crazy, but pick a colour that appeals to the masses. Just because you want a #hotpink car doesn’t mean the next person will. Choose timeless colours like black, white, beige, or grey. Additionally, there is something to be said about automakers who have been in the game for a while, and that is that they hold tons of resale value. Go with a brand with a history of holding its value, such as a Toyota, Honda, or Nissan. Or, recently, the Jeep Wrangler was ranked as the top vehicle for resale. Luxury vehicles such as BMW and Audi tend to have a bigger gap between what you paid for them and what you can resell. That’s not to say they don’t hold their value; the purchase price is so much higher than more common brands, and typically, those who can afford luxury cars want a brand new one.
A few final tips to minimize the depreciation and increase the amount you get when you sell it. Consider buying a used vehicle where the depreciation has already been accounted for. On that note, if you are looking to sell your vehicle and it still has a warranty attached to it, sell before that expires, as it’s a huge selling feature. Pay off your car loan as quickly as possible to save you money in the long run. The longer you have the loan, the more interest you will pay, decreasing what you get as cash in your pocket.
If this article hasn’t scared you away from buying a brand new car, we aren’t sure what will. But, if you still want that bright, shiny new car, do yourself a favour and at least give certified pre-owned vehicles a look. We make it easy for you to do so. You don’t even have to leave your house if you don’t want to. Check out our massive inventory, look at the 360° virtual tour, see what your current vehicle is worth and if you see something you like, complete the purchase online or in-store, and then enjoy a 24-hour test drive. . If you still want to buy new, we’ll give you your money back. No hassle, no problem.
