New Car Depreciation

New car depreciation is the dread of all new car buyers. You know as soon as you drive it off the lot, you’re going to lose money. For some, this can be a reason to buy a used car instead. However, it doesn’t have to be. There are ways to recoup this cost by doing a little vehicle research before completing the purchase. Some cars keep their value much longer than others, and it might be worth it to find out if one of these fits your needs.

Usually, when you first leave your car lot, you can figure on losing 10% to 11% of the car’s original value. This is immediate from the first minute you drive away. From there on, you will probably lose 5% more of the value by the end of the first year. At the end of five years, you will lose an approximate total of 60% of your car’s value. Don’t let this be disheartening news for you, as there are some things you can do to mitigate this loss.

One tool that is online and free to use is that of the depreciation calculator. You can put in whatever year, model and make your electric car is that you are considering purchasing, and it will let you know what kind of depreciation to expect. This is where you will see how the difference varies between foreign and domestic cars. Brand names also make a difference, as well as the reputation they have for lasting a long time.

Some things you can do to help with this inevitable result are to take precautions in terms of insurance, a finance loan and how many miles you agree for the term of the lease. When it comes to insurance, depreciation works in your favor because your premiums will drop each year along with your car’s value.

However, when you first acquire a loan for the purchase of your car, you can also get what is called gap insurance. This is the finance portion that will cover the difference between the current value of your car and what is left on the original loan in case of an accident. For instance, if your car depreciates $3,000 in the first month of ownership and you total it at the end of the time, you would normally only have enough insurance to cover the value of the car, leaving you to come up with $3,000 to repay the finance company. However, gap insurance would take care of this amount for you.

When you lease a car, you have an option as to how many approximate miles you will be driving each year. By making this as low as possible, and still staying under that amount to avoid penalties, you will slow down the rate of depreciation. The more miles a car has on the engine, the lower its value will be when you try to resell it privately or trade it in.

Just because car depreciation happens to everyone who purchases a new car doesn’t mean you should avoid purchasing from a car lot. The money you save in potential repairs after purchasing a used car as-is will be back in your pocket because you have something that is working and under warranty for several years. As well, it can help you in terms of credit because everyone who checks your credit score will see that you are approved for a high loan already. This will in turn help you acquire more credit whether for personal or business use.

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