Is Your New Car a Money Pit? Understanding the Impact of Depreciation

New car depreciation isn’t often discussed, but it can cost you thousands of dollars without warning. When you buy a new car, it immediately loses value. Over the next few years, it continues to depreciate until it’s worth a fraction of what you paid for it. 

Hawthorne Auto Square keeps Californians in the loop when it comes to used car price trends. Trust our team to find you a good deal that suits your taste and budget.

Why Do New Cars Depreciate So Quickly?

When deciding between buying a new car vs. a used car, it’s important to consider car depreciation. In the first year, you can expect the car to lose up to 20% of its value as soon as it’s registered in your name. After that, it’ll continue on a downward trend, losing about 15% more per year until year four or five, after which time it slows down.

This depreciation is due to many factors:

• Wear and tear
• Age
• Mileage
• Condition
• Perceived value
• Fuel efficiency
• Technology changes in new models

How Does Depreciation Affect Your Finances?

Car value depreciation reduces the resale value of your car and can mean you’re paying more in interest and loan payments than the car is worth. While it can be frustrating to realize your car started losing value as soon as you drove it off the lot, knowing what to do to minimize your losses gives you the power to keep your car’s value as high as possible. 

If your loan is underwater and you owe more than the car’s worth, consider selling it. If you have good credit, you can use the money to pay off your creditors or refinance your loan. 

Strategies to Minimize Car Depreciation

If you’re wondering how to minimize car depreciation, the best strategy is to buy a used car rather than a new car. Most depreciation happens within the first few years. 

Other ways to minimize car depreciation include:

• Choosing a car with a good resale value (a common make and model in a popular color)
• Do your research beforehand so you can negotiate a fair price at the time of purchase
• Get to know your car and understand what it needs (maintenance, etc.)
• Keep your car clean and presentable (don’t smoke or eat inside, have it detailed, clean any spills or mud right away, etc.)
• Keep your mileage low (avoid joyriding on the 101)
• Know when it’s time to sell your car

Should You Buy New or Used? Leasing vs. Buying?

Buying a new car can be like throwing money away. As soon as you drive it off the lot, it depreciates by as much as 20% and loses even more value in the next few years. Choosing a car that’s a year or two old is more economical than buying a brand-new model. 

Buying a car means that once it’s paid off, you own the car outright and it becomes your property. With leasing, you’ll often have lower monthly payments than you would if you were purchasing the vehicle, but you have to give the car back at the end of your term, which may be laid out in mileage or a certain number of months. You can also choose to buy the car at the end of your term.

Check out the listings at Hawthorne Auto Square to see what types of vehicles are available today. We offer purchase and leasing options and can help you decide what’s right for your budget and lifestyle. 

Maintaining Your Car’s Value

Here are some of the best ways to help maintain your car’s value:

1. Keep up with repairs and maintenance

After age, one of the biggest factors affecting car depreciation is wear and tear on the vehicle. The better you keep it running with regular maintenance, the higher its resale value will be.

2. Drive carefully

Accidents and damage, even superficial dents, can affect the value of your vehicle. Drive carefully to keep the value high on your car.

3. Keep it clean 

The nicer the car looks, the higher the resale value. Don’t let grime, crumbs, pet hair, or mold cause you to lose money. 

4. Don’t customize 

While customizing your car can be fun, the fewer alterations and customizations you make to your vehicle, the more likely you’ll be able to sell it when you’re done with it. Not everybody likes a low rider or a custom paint job. 

If you’re considering selling your car, call Hawthorne Auto Square. We’ll give you a good value, whether you want to trade in your car for a newer vehicle or sell it to us outright.  

Contact Hawthorne Auto Today

Hawthorne Auto Square is your one-stop shop for financing, buying, and selling used cars. If you’re looking for low-depreciation cars that fit your budget, contact us today. We can pre-approve your financing and help you find what you’re looking for. 

Our friendly and trustworthy salespeople will assist you in finding the perfect used car for your needs. Let us find you a vehicle you love that fits your budget. With our six-month comprehensive warranties and wide range of brands, you can’t go wrong with Hawthorne Auto Square.

Frequently Asked Questions

What is the depreciation rate of my car?

In California, car depreciation is calculated by year. Other factors include whether it’s been in any accidents or has sustained damage, how well it’s been maintained, and if newer models with higher-valued features have come out. 

Which car models have the highest depreciation rates?

Some current high depreciation cars are BMW 7 Series, Maserati Ghibli, Cadillac Escalade, Infiniti QX80, Jaguar XF, and other high-end vehicles that cost a lot to purchase off the lot. 

Which car models hold their value the best?

According to the Kelley Blue Book, some of the top cars known to hold their value over the years include Toyota Tacomas, Subaru Imprezas, Honda Civics, Kia Rios, and Chevrolet Corvettes.from the dealership.