New cars depreciate in value: Here’s how to beat it

New cars buyers have many things on the table to consider before driving away with that dream car. Depreciation is at the top of the list because vehicles lose up to 20 percent of their value in the first year after leaving the showroom. This shows that if they choose the wrong car and have to sell it later in the first year, they will bear the loss. Some car buyers believe depreciation is unavoidable because it is beyond their control. However, experts always have a way around it. Some recommend buying a nearly new car after the high depreciation phase and selling it before it reaches the point when the value drops steeply. But does this strategy actually work? If not, what are the best depreciation hacks that work? This article helps readers understand the basics and avoid losing money through high car depreciation.

family new car

Source: Pexels

Understanding Depreciation

Things lose value with time due to wear and changes in perception. If many people consider something valuable, they will be willing to buy it, and the price will increase if the supply is constant. This explains why some car models lose more value than their counterparts within the same depreciation period. Cars lose a higher percentage in value during the first year because of wear and reduced demand because many buyers would rather spend a little more on a new vehicle. In the first five years, cars lose approximately 60 percent of their value. That is why many people buy pre-owned cars. Some reputable dealers understand this market gap and sell the best used suv at very affordable prices. This is the first approach to beat depreciation.

Car owners who want an upgrade can trade their cars for new or used ones. How does trade-in work? The dealer evaluates the condition of the car with the help of a professional appraiser. Then, the dealer gives the current car owner an offer, forming the basis for further negotiations. Therefore, people who already have cars can conveniently exchange them with new or used vehicles at the dealership. To take advantage of the car prices, car buyers should study the car market trends to know when the cars are cheaper. Also, they can take advantage of the supply chain problems, which could increase the demand for specific used cars. If gas prices rise, less efficient car models will have low demand, which presents an opportunity to buy them low and beat depreciation.

Should Depreciation Be a Cause for Concern?

The only good news about depreciation is that it only matters when selling the car or applying for a car title loan. Therefore, a car owner can enjoy driving it without worrying about depreciation until it is necessary to sell or take out a loan. Some car owners are always thinking about the price of their car and the amount it has lost through depreciation. However, an old car that is well maintained could attract many buyers and fetch more in the market than a newer model with many faulty parts. While depreciation is unavoidable, proper maintenance could protect the investment, which is another way to beat depreciation.

Car owners should consider depreciation as a cost of owning a car. Besides the loss in value every year, the car owner bears the repair and insurance costs. However, car owners can manage these costs better by following instructions from the manufacturer and learning how to increase fuel efficiency and reduce maintenance costs. Additionally, it is crucial to identify car models that depreciate the least and why. This knowledge will help a car owner beat depreciation and avoid surprises when selling a car.

Can a Car Buyer Take Advantage of Depreciation?

People who own old cars can actually use depreciation to their advantage. However, they must choose the right time to sell the vehicle. If a dealer or private car buyer presents a small offer, a car owner can actually wait longer than the average time other owners use the cars before selling. The depreciation rate usually slows down when a vehicle hits 100,000 miles. This is a general assumption, so buyers should research in their locality. If this is true, they should sell the older car at about 40 percent of its value and buy a slightly used car, which is as good as new at about 80 percent of its value.

However, car buyers should pay attention to maintenance details. Some cars require major repairs or major parts to be replaced after a few years on the road. So buyers should buy the car after major maintenance to avoid bearing the costs. Another aspect they should consider is the factory warranty, which shields the new owner from high repair costs. Therefore, not every used car will help a car buyer beat depreciation.

Useful Depreciation Hacks to Consider

Besides the complicated strategies, there are more straightforward ways to beat or at least manage depreciation. One of them is keeping maintenance records. These records give potential car buyers a reason to choose the vehicle and actually pay more. Another tip is to remove customisation features. This might seem counter-intuitive, but cars with basic features and accessories attract more buyers. Flashy accessories designed to demonstrate the car owner’s style might reduce the number of interested buyers. Note that replacing these accessories and changing customisation features could attract more costs, which buyers want to avoid.

Business owners can take advantage of depreciation and gain from tax breaks. Therefore, if it is a business car, a tax expert can guide the owner on deducting a percentage of the depreciation amount from the tax due. This tip helps the car owner realise part of the depreciation before selling the car. When it is time to sell the car, the owner should consider selling it privately. Although it might take time to find a buyer, a private sale could fetch a higher price. That is because the seller pockets a portion that would otherwise go to the dealer.

Car owners or buyers can use these time-tested strategies to manage depreciation. However, not every hack will work for every car owner. Therefore, there is a need to evaluate this strategy and apply the most appropriate tips to beat depreciation.

Facebook Comments