How to Calculate Your Car’s Depreciation

If you’re ready to sell your old car buy a new one; you need to know how to calculate the depreciation of your current vehicle.

It’s impossible for a vehicle to avoid depreciation, or go down in value over time. The only time vehicles increase or appreciate in value is when they become classics that are rare and fetch a high price at auction. Typically, our cars decrease in value over time because of several factors. When it’s time to sell your car, you’ll need to know how to put these factors together to come up with a value for your ride.

Do You Control the Depreciation?

In some ways, you do have control over how much your car decreases in value over time. The more you drive it and the worse condition it’s in, the more it will depreciate. When it’s time to sell your car, if you don’t ask for a high enough price compared to the miles on the odometer and the condition of the vehicle, you’ll create a certain level of deprecation with that price. It’s good to use several used car calculators to understand how much your car is worth now.

Shouldn’t I Get the Same Price I Paid Originally?

You’ll hardly ever get back as much in the vehicle when you sell it as what you paid to buy it originally. This is especially true when you buy a new car and sell it a few years later. If you buy a used car several years after its model year, you might get back what you paid for that vehicle. Because this is rare, you should be prepared to lose some of what you paid. That’s part of driving, though; the old joke is that a car loses half its value as soon as you take it off the lot.

How can you Calculate the Depreciation of Your Car?

If you want to figure out how much your car is worth, you need to take certain factors into account. These factors cause your car to reduce in value. A few are within your control, while others are not. These items are:

  • Mileage
  • Fuel Economy
  • Consumer Preference
  • Condition
  • Reputation

These five factors give you an idea of how much your car is worth, but one more factor is part of the current market: demand.

Take Advantage of the Current Demand

Before we get into the traditional factors in vehicle depreciation, you need to understand the market we are in right now. After the pandemic, the demand for new vehicles skyrocketed beyond the point of automakers’ ability to keep up with the demand. This caused more of a requirement for used vehicles to fill the void. Your used vehicle is likely to fetch a much higher price right now than once the market levels off again. If you sell your used car now, you should get more for it than you might otherwise, but if you’re going to buy another vehicle, the same pricing strategy could be used against you during your purchase.

How Does Mileage Impact the Value of Your Car?

When you calculate the depreciation of your vehicle, one of the most important factors is the number of miles driven. The more miles you drive, the less your car is worth; that is a simple part of the calculation. The more you can keep the miles down, the more it will be worth when you’re ready to sell. If you’ve used your old vehicle as a daily driver, expect to get less than someone that uses it only on the weekends.

Why Does Fuel Economy Factor into Depreciation?

Fuel mileage isn’t a direct component of factoring depreciation, but it has a place in this conversation. If you drive a vehicle that uses a lot more gas, you’ll only attract buyers that don’t care about fuel mileage. Currently, we’re in a market where gas prices are sky high, and people are looking for ways to save on gas. If you’ve got a small hybrid or relatively efficient model to sell, you’ll have a much easier time selling it at the right price than you would a large pickup truck.

Consumer Preference Plays a Role You Can’t Control

How are you supposed to calculate consumer preference into depreciation? You can’t. What you can do is use some of the online tools that follow this trend and give you more accurate information. If you have a vehicle that isn’t popular right now, that doesn’t mean it won’t be in a few years. On the other hand, some buyers are looking for a vehicle that’s a little different or has fallen out of favor with trends. These could be the buyer you target when you want to sell your old vehicle.

Like Mileage, You’re Completely in Control of the Condition of Your Car

With today’s technology, we have vehicle history reports, online maintenance records, and recall notices. As long as your maintenance was recorded by the shop that performed it, the records should be relatively complete. The vehicle history report tells potential owners about accidents and repairs performed. If you’ve kept good records, kept the car clean, and haven’t had any accidents, you’ll receive the top price for your vehicle. If you’ve had any issues while driving, the price will go down in a hurry.

The Brand Reputation Matters

When you calculate deprecation, the first thing that’s considered is the vehicle itself. If you own a Toyota, you’ll come closer to getting what you paid for the vehicle. This brand has a longstanding reputation for reliability and dependability on the road. On the other hand, if you have a Fiat to sell, you’ll see the difference between what you paid and the value of the vehicle drop quickly. This is something to consider when you buy your next car as well. If you buy a vehicle that doesn’t have a good reputation, you’re getting what you pay for.

If it’s time to sell your old car, use some of the online tools to calculate the depreciation and then list your car for a fair price to sell it quickly.

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