December 7, 2013
What is the average depreciation (approximately) of a new car in the first year? Why should you care?
What is the average depreciation (approximately) of a new car in the first year? Why should you care?
I’m not sure about in the first year alone, but after 2 years, a $30,000 vehicle will have lost somewhere between $10,000 and $15,000 to depreciation. You should care, because why on earth would you pay that much money for something that’s only going to be worth between 2/3 and 1/2 of the price you paid just two years later? Wise car buyers buy a 3 or 4 year old vehicle, as those vehicles have already lost most of the depreciation.
Well said, Katherine! Let’s recap.
The average new car will lose approximately 20% of its value in the first year. A $30,000 will be worth approximately $24,000 after year 1! It doesn’t get much better in year two. Katherine’s question is a good one, why on earth would you pay that much money fro something that’s only going to be worth so much less in the next few years?
Cars are wealth depleting depreciating assets. New cars speed up the process of depleting your wealth at an even faster rate. Buying that 3 or 4 year old vehicle can save you THOUSANDS and have a smaller impact on your actual net worth. Think before you leap!