One of the steepest drawbacks of purchasing a new car is the severe depreciation that it undergoes shortly after it is purchased. The exact amount that a car will depreciate depends in part on the make and model of the car, which will influence the amount of demand for it, as well as the condition in which the first owner keeps it. However, according to Bankrate.com, a new car will generally lose 15 to 20 percent of its value in its first year.
A new car will lose more than 15 percent of its value after a single year. In fact, much of this value will be lost in the first minute after a new car is driven off the lot. This is because, immediately after a person has purchased a new car, the dealer who sold it to him will only be willing to purchase the car back its wholesale price, which is generally significantly lower than the sale price.
The exact amount that a car will lose in its first year depends on a number of variables. This includes the amount of wear and tear the car sustains after its first year. Also, certain models have better reputations for durability. These cars will generally fetch more on the used car market.
Subsequent Year Depreciation
According to Bankrate, most cars will lose between 15 and 20 percent of their value each year. For example, if a car that sold for $10,000 lost 20 percent of its value its first year, it would be worth $8,000. If it lost 20 percent the next year, it would them be worth $6400. The rate at which a car depreciates will slow as the car gets older, with cars in their third year losing only about 10 to 15 percent of their value.
While many consumers use pricing guides to determine the value of a vehicle, the true value of a car is the price that someone else is willing to pay for it. The price of certain cars can vary, depending on the region in which it is sold. For example, mountainous regions may be willing to pay a premium for four-wheel-drive vehicles, while warmer climates may have a greater demand for convertibles.
Michael Wolfe has been writing and editing since 2005, with a background including both business and creative writing. He has worked as a reporter for a community newspaper in New York City and a federal policy newsletter in Washington, D.C. Wolfe holds a B.A. in art history and is a resident of Brooklyn, N.Y.