Usually, when you buy a car, depreciation is one of the things that do not cross your mind. However, it is an important thing to consider for you to get a good price when it comes to the time of selling. Choosing wisely ensures that depreciation is going to be minimal, but if you do otherwise, it could prove to be a costly mistake.
What Is Car Depreciation?
When one sells his/her car for a higher amount of money that what was paid for, he/she has made a profit. When it sells for less, a loss is made. The loss in monetary value is known as car depreciation. Usually, cars depreciate as they undergo wear and tear through daily use.
Second hand cars versus new cars
New cars are prone to high depreciation. They normally lose a large chunk of value in the first years of use. This can be 35% to 55% of the original price tag. You can use a depreciation calculator to determine your car value after a given duration of use. A calculator can base its estimation on the number of years or miles your car has traveled. It is therefore advisable to buy a second hand car that has been on the road for about 12 months. This will offer you a good price. In addition, you will be benefiting from its existing warranty. It is important to note that as the car passes its third or fourth birthday, its depreciation rates slows down.
Factors Affecting Car’s Depreciation Rate
Some of the factors that influence the depreciation rate of cars include supply and demand, construction quality, and maintenance, running costs, and fleeting thought.
Supply and Demand
When the supply of cars is more than the demand, prices are lower. The converse is also true. This will have a direct impact of a car after some years of use.
Cars are made by different manufacturers. Manufacturers that use high manufacturing standards attract high price tags for the second hand cars. Hybrid cars such as the Honda Civic Hybrid and Toyota Prius have great demand because of environmental concern. This increases their prices.
A poorly maintained car will depreciate very fast. This does not matter the kind of car model. This is because people love to buy well-maintained cars and accident free.
These costs include car insurance, fuel, economy, servicing, and road tax. All these factors play a part in influencing the car’s rate of depreciation.
The best way of estimating the value of a car after some years of use is by using a car depreciation calculator. It will help you know the value you should sell or buy your second hand car.