Death, Taxes, and Depreciation

Death Taxes and Depreciation

How Avoiding Vehicle Depreciation Can Save You Thousands

Depreciation is an inconvenient and unavoidable truth when considering a vehicle purchase. Your shiny new ride can potentially lose up to half of its value before you’ve paid off the note. Here are some things to consider to help you potentially save thousands of dollars.

How Popular Are Your Design Opinions?

Unless you plan to hang onto your new car for life, you’re better off sticking with a more mainstream color palette. While some colorful shades resell well (reds and yellows), your trade-in value will be lower if there isn’t a large pool of buyers who want an SUV painted like an Easter egg. Depending on the area you’re in, certain styles such as convertibles might hinder your resale and trade-in value, too. The same goes for sound systems. Many used car buyers don’t have a bumpin’ sound system at the top of their vehicle wish list, so you’re less likely to get your money back in resale.

Smart Technology

Like computers, the technology that goes into vehicles changes at an incredibly fast pace. And, just like computers, it doesn’t take to many years for today’s cutting-edge tech to seem quaint and outdated. If you’re going to spend money on technology in your new car, spend it on safety technology. Yes, this technology is revised and improved too, but having the basics like rear-view cameras, lane change assists, and collision avoidance systems help a car hold its value while lowering insurance costs.

Don’t Ignore The Maintenance Schedule

Keeping your car’s engine maintained isn’t just about enjoying a few happy years before you trade up to your next car. These days, savvy shoppers want a CARFAX report on the used car they’re interested in. The amount of information in these reports will either be good news or bad news for your resale or trade-in value. If you’ve taken your car in for regular oil changes and other manufacturer-recommended maintenance, chances are it’s on the report. Is a potential buyer more willing to buy a car with a history of regular maintenance, or one with little to no maintenance history?

Skip The Showroom And Step Outside

Of course, the easiest way to avoid heavy depreciation is to buy used. When you buy a used car that is less than four-years-old, you get the new safety and technology features for 20-40% less than the cost of buying brand new. Cars in this age range may still be covered under the manufacturer’s warranty, provided they haven’t exceeded the mileage restriction.

You have additional options for buying used cars. You can purchase from a private party if you don’t want to go to a car lot. Alternatively, you can look into buying a lease return vehicle. Lease returns are likely to have been regularly maintained, and the dealer should have a complete history available.

Do Your Research

Even if you buy your vehicle used, you’ll still have to deal with depreciation over the time that you own it. Whether you buy new or used, if you want to avoid heavy depreciation on your car, do your research to see which makes and models are most likely to hold their value over the time period that you plan to own your car. Also research your geographic area to find out what cars and features are most in-demand from buyers.

Depreciation is part of the costs of owning a car. But if you make your purchase with your plan in mind—whether you plan to keep it forever or trade up in three years—you’ll throw less of your money into the black hole of depreciation.

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