Thu. Jul 25th, 2024

There are a thousand factors that go into determining what your car is worth. While the monetary worth of your vehicle is far from the only thing that goes into determining its overall worth in your life – indeed, you cannot put a concrete price on the value of being able to get to and from work or having the freedom to go out at your leisure – knowing how much financial equity your vehicle commands is never a bad thing. That means learning about exactly what causes vehicular value depreciation. The factors that go into calculating depreciation can seem arbitrary, but there are a few that are well within your control.

If you have been wondering what goes into determining how much your vehicle is worth after it passes into your possession, this guide is for you. We have worked with the experts at Burns Honda to demystify a few of the reasons you can expect a gradual decrease in value. Armed with this knowledge, you will be able to determine which of the seemingly random factors are and are not within your control. The process can be frustrating but knowing what you are getting into can blunt that frustration.

Driving Off the Lot: Why Does It Matter?

You have probably heard this one, but it remains a shocking truth: the moment your car leaves the dealership’s possession, and its tires meet the road, its financial value depreciates. It is astounding that driving a new vehicle a few feet can cause a difference of up to thousands of dollars, regardless of the fact that the only difference between those few minutes is who is driving it. It seems ridiculous that simply leaving the dealership with your new car can reduce how much it is worth. The decrease is not even due to mileage or wear and tear; if you were to park the car in a sealed garage a few feet from the dealership and leave it there until the return period has ended, then bring it back in the exact same condition as when you bought it, you would be thousands of dollars behind. If you are anything like the average customer, you have wondered why that may be.  

As you can see here, the loss in value is due to an arbitrary word: used. The market ascribes a lot of value to the word ‘new’, enough value to increase the price of an automobile substantially. The reason for this makes sense on its face, even if not under every practical scenario. ‘New’ comes with the promise that the vehicle is in the best possible condition. Vehicles that were never titled, never driven, and never forced to undergo maintenance just feel like better investments than those that have been driven, even if just a little bit. When it comes right down it, people just feel better with a new car than they do with a used one, even if the ‘used’ status comes from having a single owner for a few minutes. There is nothing logical about it, which makes it even more infuriating that depreciation is so powerful for merely driving off the lot.

Keeping Regular Maintenance

Of course, the main reason that new has more perceived value than used is due to the lack of wear and tear on the vehicle. While driving it from the lot may not add enough of either on the engine to justify the immediate depreciation that comes with it, there is a difference between driving a few miles and driving around for a year. While a year or two of driving is hardly enough to cause serious damage to your car – barring major catastrophe – the thing to understand is that the average consumer does not know for sure what condition the car might be in if you want to sell it to them. There are plenty of wonderful tools that you can use to check a car’s history, but there are also more than a few ways that its history can be obscured. While deception of this caliber is rare with dealerships, the fear still persists either way.

There are ways you can mitigate this kind of depreciation, however. The folks at Kelly Blue Book recommend at that keeping regular maintenance on your vehicle can save you a lot of money in the long run. Be sure to keep diligent records as well; every bit of maintenance you do on your vehicle should be thoroughly documented and kept in an organized file. That includes making sure to get in for an oil change per manufacturer recommendation. Missing even a single oil change can cause faster and more dramatic depreciation due to the unnecessary strain it could put on your engine. Responsible care for your car can go a long way toward minimizing the amount of value it loses over time.

By Manali