People often say a car is one of the worst investments you can make because its value declines day by day. However, if you’re selling a used car or are in the market to buy one that you might want to sell down the road and want to get the most money for it, understanding how depreciation works and what drags down your car’s value is critical.
How Depreciation Works
Depreciation describes the way that an asset, such as a car, loses monetary value over time. A new car loses about 10% of its value the minute you drive it off the lot, 25% a year later, and 63% five years later. This is one reason many people choose to buy used.
While the pace at which a vehicle depreciates varies depending on wear and tear, cars considered reliable and that don’t go out of style tend to retain their value better than vehicles that require more repairs or aren’t wanted a few years down the road.
If you’re looking for a place to start, Buick, Toyota, and Kia top U.S. News & World Report’s most reliable non-luxury car brand list.
What Drags Down Your Car’s Value
While depreciation varies and can’t always be controlled , there are five factors that you should consider when purchasing a used car that you may want to resell down the road.
1. Maintenance – Changing the oil really does make a difference. Follow the guidelines in the owners manual to ensure the best return on your used car.
2. Color – While you might love purple or neon green, other buyers may not. Choose a common or neutral color for the best resale value.
3. Options – It might surprise you to know that fully-loaded vehicles lose their value faster than base models. Features that return the least value include power sunroofs, heated/cooled seats, and over-sized chrome wheels.
4. Mileage – Cars with less miles retain their value better. Keep the industry standard of 15,000 miles per year in mind as you shop.
5. Fuel efficiency – Regardless of what the price of gas is, better gas mileage is always going to be a plus for a car shopper, so when you’re comparing two models that are equal in every other respect, go for the vehicle with the best gas mileage.
If you buy a reliable used car with desirable options and take good care of it, you should be in good shape to get the most value for it when you go to sell or trade it in. The great news is that after 10 years, depreciation no longer impacts the value of your vehicle.
The best way to get the most value for your used car is to buy a good car to begin with, take care of it, and hang on to it for the long haul.