Some things like fine wine or rare coins increase in value with time. Cars and trucks usually don’t do this unless you have a rare vintage vehicle. Even though cars usually depreciate with time, there are ways to get the most out of this situation, such as with car inspections. Let’s find out how.
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What Is Car Depreciation?
As almost everybody knows, cars lose their value with time. A simple way to understand depreciation is that a used car is less expensive than the same model when it is new. What you might not know is that depreciation can be instantaneous.
For example, as soon as you purchase a new car and drive it off the lot, it immediately loses (depreciates) up to 10% of its value. That means a car bought for $30,000 depreciates $3,000 in an instant.
Downhill Slide Or Good Deal?
As time goes on, the car value loss increases. In just two years, your vehicle is worth only about 70% of its original price. That means our $30,000 car is now worth only $21,000 which is a $9,000 depreciation. After five years, a typical vehicle depreciates to around 60% of its original value.
The loss of price on a car isn’t always a bad thing. If you are looking to buy a car, you can find some great discounts when you buy used. In general, today’s cars are much more reliable, so in this case depreciation can be your best friend. Even if you are selling a used car, you can use depreciation to your advantage. Let’s look at both scenarios.
How To Take Advantage Of Depreciation When Selling Or Buying Used
Depreciation can be leveraged on both the buy and sell side of used car deals. For example, if you are selling a used car, you can offer a price a bit higher than the depreciation rate and make a bit of money compared to the rest of the market. You might find it hard to justify the increase, but if you include a third party, pre-purchase car inspection, you can show the quality of your car is superior to other similar models available on the market.
On the buy side, when you know a car’s depreciation rate, you can estimate the true value of a used car and try to get a deal below this price. Also, if you order a pre-purchase inspection, you might find a vehicle in unusually good condition which makes it more valuable than average. Without a qualified inspection, however, you rely on your evaluation of the car alone.
Get as much information on any used car before you buy, and increase your buying confidence. Order a pre-purchased used car inspection from CARCHEX today.
