Do all cars depreciate over time?
When buying a car, whether it’s used or new, you are likely to hear the word depreciation thrown around quite a bit. If you’re curious what that is and what that means to you, then we are here to help. What does depreciation mean? Do all cars depreciate over time? We have answers.
What is depreciation?
Depreciation applies to any asset, not just cars. Nearly all personal assets depreciate over time, and it’s essentially a decrease in value over time. You buy a car for $10,000, and after 2 years it’s worth $8,000. That’s depreciation in action.
Of course, not all assets depreciate. Most houses go up in value over time, even beating inflation. Businesses and land can become more valuable over time too, and even cars can avoid depreciation, but we will get to that more in a moment.
Read More: Order a used car in Chicago
When is depreciation the worst on cars?
Cars experience the most depreciation the moment they are purchased. Just changing a car’s status from new to used will drop the value. After the first year, most cars will have lost 20% in perceived value, and they will continue to lose 10% in value annually.
Notice how we said perceived up there? That’s because used cars are commonly undervalued. For the 20% off the price of a new car, you can get a one-year-old version of it, that still has most of the features, quality, and longevity. In other words, buying a used car is often the smart choice.
Read More: Benefits of buying a used luxury car
Are there cars that don’t depreciate?
Most cars will depreciate normally just as we have discussed above, but there are a few exceptions. Many enthusiast cars, collector cars, and classics do not adhere to the normal rules of automotive depreciation. In fact, some can appreciate, or gain value over time. For example, many Porsche 911 models tend to appreciate assuming they are cared for.
Determining which cars will maintain price or even appreciate can be difficult, and will require research, expertise, or both. It’s also worth noting that just because a car is appreciating now, doesn’t mean it will always appreciate.
Conversely, just because a car is depreciating now doesn’t mean it will always depreciate. In fact, many enthusiast cars decrease in value right after release, and then eventually reach a tipping value where they begin gaining value.