Unlike other assets, new cars go down in value the minute you drive them off the lot. That’s because new car prices are based on a “target” price for each model, which is inflated to account for marketing and distribution costs. After a car has gone through its manufacturer’s initial depreciation period, its value stabilizes at an average of around 41% of its original list price.
There are other factors at play, though. Some cars lose their value faster than others due to competitors, for example. And prices can vary depending on whether a car is sold in a hot-selling area or not. A new vehicle may lose value fairly quickly, but it’s always going to be more valuable than a used car. In fact, the average 3-year-old vehicle is worth less than half of its original list price. That’s because used cars are worth more when their mileage is low, because it means they haven’t been driven much.
The biggest factors determining how much a car’s value decreases are its condition, age, and mileage. And quality and demand also play a role. Luxury cars typically depreciate more slowly than economy models, for example, because they’re in greater demand. Customers hoping to get a deal on a luxury car, however, can focus on models that have seen their value sharply decline.
Another common reason is that new cars are expensive to maintain. They have high dealership costs and high maintenance costs which can account for up to one-third of the purchase price over the lifetime of the vehicle. New car owners also have to spend more money on insurance premiums, fuel and taxes than owners of older vehicles.
Consider your next vehicle purchase by going to the Binghamton Auto Exchange located at 209 Vestal Parkway West in Vestal NY. You can call us today at 607-754-9118 and see why we are the most trusted name in pre-owned luxury under $15,000 since 1976.
