Vehicles are products that suffer from depreciation, decreasing in value with time and in accordance with other factors such as amount of use and the level of wear and tear. Fortunately, however, this depreciation tends to follow a pretty set pattern, and there are a series of the factors that determine the value of a car pretty accurately. Any reputable dealership will have the expertise to properly appraise the value of your car and offer the best possible price (especially the ones, like Cash for Cars in San Diego, with nationwide market access). Nevertheless, it is perfectly possible to get a rough ballpark estimate for the value of your car. All you need is a little knowledge of how cars typically depreciate.
Naturally, older vehicles suffer from wear and tear and, among the even older ones, a certain degree of obsolescence among the driving and on-board technology. These are the factors that typically govern the depreciation of cars, but it is not a uniform decline. Vehicles typically depreciate on a curve, and you also need to take into account the restoration work that can be performed on a car, which typically increases the selling price. Such work falls into two categories – that performed by the owner prior to sale and that performed by the buyer if they wish to sell it on. Again, in the case of reputable dealerships with nationwide market connections, they typically have the resources to significantly restore vehicles. This is just one of the reasons why they offer the very best prices for used vehicles.
With all these additional factors taken into account then, how exactly do cars depreciate in value. And is there a sweet spot in age when the price of the car, relative to condition, makes for a sale that is real value for money?
The Depreciation Curve
If there is one hard and fast rule that governs the value depreciation of vehicles, it is that new cars depreciate much faster than older ones. In fact, the moment you drive a new car off the lot, it instantly loses between 9% and 11% of its value. Within a year, the average car has lost 20% of its value. After that, a car loses about 15% to 25%, year on year, for five years. After that, things slow down significantly.
As you can no doubt tell from these numbers, the fact that a car loses around 10% of its value right away reflects that restoration can only achieve so much. A car that is a couple of days older than new is virtually identical in condition to one still displayed on a forecourt – and yet it will be sold for significantly less money.
The Usage Sweet Spot
This is where a car buyer can, with the aid of a competent dealership, scoop up a real bargain when purchasing a used car. Put simply, the depreciation in value within those first years is in no way equivalent to the decline in condition over the same time. It is perfectly possible, therefore, to find a car 60% cheaper than new, but only a few years old and hardly declined in condition at all.
For sellers, this poses a problem. And the way around it is to get more than five years use out of your car before selling. A good dealership can help with effective restoration work, allowing for a much older car to sell for significantly more than expected. When the depreciation curve becomes gentler, this is the time to make use of a good dealership and sell your car.
