The exact amount of depreciation for a specific vehicle varies by market, mileage, vehicle condition and the actual price you paid when you first bought the car. Average depreciation statistics, usually offered for new cars, are based on sticker price, which you might not necessarily pay because of manufacturer offers or negotiations. Consider the various conditions that affect depreciation and resale value.
Lucy Lazarony from Bankrate.com states that a vehicle loses 15 to 20 percent of its value each year. This statistic is based on average driving conditions and vehicle wear, which may differ by driver. Additionally, future market values may affect your car's value, along with your overall purchase price. You will receive a higher value for your vehicle if you sell it privately rather than trade it to a dealership, which offers wholesale pricing.
New Car Depreciation
A new car depreciates fastest in its first year. Once purchased, a new car immediately becomes a used car, causing a significant drop in value. Philip Reed of Edmunds.com suggests providing a down payment of at least 20 percent when purchasing a new car to alleviate the depreciation rate common for a new car purchase. New car depreciation amounts may differ by buyer. One owner might purchase a vehicle for $25,000 while another person, who bought at a later date, saves $4,000 in automatic rebates. The best way to determine your new car's immediate depreciation is to check its used car value at an appraisal website.
Used Car Depreciation
Used car depreciation values may prove harder to determine. Prices differ by seller. You may purchase your used car privately for thousands less than it sells for at a dealership, known as retail value. In this case, your vehicle will depreciate slower than one purchased for retail value. Price research and negotiation ultimately affect your purchase price, which decreases your car's depreciation amount. Be sure to shop values and various sellers to ultimately obtain a good price and decrease your depreciation amount.
Unexpected market value issues can substantially affect your car's depreciation. Even if you found your vehicle depreciates less than others, market issues can change future values without notice. For example, if you vehicle has poor fuel economy and gas prices skyrocket, expect a significant drop in your car's value, which results in faster depreciation. Or, if the vehicle's manufacturer discontinues your make or model of vehicle, depreciation rates accelerate unless your car is rare or sought after. If you drive more than 12,000 miles per year or your vehicle isn’t in good condition, expect your car’s value to drop more than average.
Shanan Miller covers automotive and insurance topics for various websites, blogs and dealerships. She has extensive automotive experience, including auction, insurance, finance, service and management positions. Miller has worked for dealer sales events around the United States and now stays local as a sales and leasing consultant for a dealership.