New Car Buying Tips

Depreciation is Expensive:  The car payments, gasoline charges, insurance expenses and the repair jobs are significant to owning a car; however, the most important expense will be the depreciation of your car.  The depreciation or the loss of your car’s value is found to be the most expensive part of owning a car, especially in the first five years.  Most vehicles will after the first five years of ownership only retain about 35 percent of their original value.  To put that in perspective, if you bought a $30,000 car five years ago, its value would be at $10,000.  So you see, losing $20,000 in just depreciation is a lot more than you would have spent on gasoline, or car repairs in that same five years. 

Determining the resale value of a car has been difficult recently, especially with the current economic downturn.  With automakers such as GM, Ford, and Chrysler along with many foreign manufacturers, having financial difficulties and the volatile gas prices the last few years, stabilized resale values have been tricky.  For example, back in 2008 gas prices were over $4.00 a gallon in many parts of the U.S.  The resale values of those big trucks and SUV’s took a nosedive.  However, this past year those gas prices have dropped significantly and those same trucks and SUV’s have regained some of their values back.

What is the Resale Value?  So, how does one buy a car that will retain a high resale value?  There are many factors to take into consideration.  First, look for a car with consistent reliability or a dependable record.  Many car publications will have that information for you as the consumer.  Another important factor in resale value is the desirability of the model you choose.  If a car is perceived as stylish and fun to drive, no matter the reliability record, they could retain as much as half of their original value after five years.  Brands such as Toyota, Subaru, Scion, Lexus, Infiniti, Honda, BMW, Audi, Volkswagen, and the Mini are all brands that have better than average resale values.

The depreciation or resale value of a car is only for those buyers who keep a car for a few years.  Anyone who purchases a new vehicle with the intent of driving it until its wheels fall off, should never concern themselves with resale or depreciation values.  It will not matter what brand of car you drive if its 20 years old and has 200,000 miles on it.  The only value you will see on a car like that will be its scrap metal value.