Knowing your car Resale value !
Understanding impact of Depreciation
The moment you register your car and drive out from the showroom, the resale value of the car drops.
That sounds SCARY!!!!
Especially in times of uncertainties, how much you will lose if you are forced to sell your car.
To counter this fear, all you need to be aware of, is the concept of depreciation. This is linked to the type of vehicle you choose.
According to current depreciation rates, the value of a new vehicle can drop by more than 15-20 percent, for the first year.
Then, for the next four years, you can expect your car to lose roughly 10-15 percent of its value annually. This means that, a new car can be worth as little as 40 percent of its original purchase price after five years.
You may keep in mind, however, that a well kept car always fetches a higher resale value. Refer my posts on how you can benefit by taking small but essential car care tips.
Major factors that determine the rate of depreciation, and therefore resale value of your car include Brand and type of car, service and parts availability, cost of ownership, price of running model etc. Thus, choosing an expensive car with slower depreciation is a better option. As it may end up costing you less in the long-term. In contrast to the one, which costs less initially, but depreciates faster.
Depreciation makes up the bulk of a vehicle’s cost. So you need to pay close attention to this. As your car, essentially is a depreciating asset. You can sell the car at any time and get some money back, but the depreciation is your actual cost – money you’ll never get back.
Luxury vehicles in particular tend to depreciate the quickest.