Why Do Cars Depreciate in Value?

When searching for cars for sale, you may have heard the stories or even experienced the depreciation that new cars have once driven off the lot. There are some reasons why this happens.

Cars depreciate because they wear out over time. As the use of the vehicle increases, the probability of incurring costs in the future in order to maintain it increases and the value drops.

Car Dealerships Mark Up the Price on Cars for Sale

Car dealerships are not non-profit organizations, so they have to raise the price of vehicles to make money. The price you see in the window of a car is the MSRP and you don’t want to pay this since the price is generally inflated.

The New Model Year Factor

Once a new model year of the car is introduced then anyone interested in the updated version of the car is looking for the new model year. New features, gadgets, and functionality drastically reduce the value of the car once the new model year comes out.

New Cars Become Used Cars

As soon as you drive the car off the lot, it’s now considered used and you have now narrowed down the list of people who would buy it to used car buyers and dealers.

Dealers will not pay more than they can get for the vehicle elsewhere. Used car buyers are not going to pay the likely highly inflated price you want for the car.

Luxury Cars Depreciate Quicker

Luxury cars depreciate for the same reasons but the giant profit margins on these cars help exacerbate the issue. The more luxurious the car, the higher the markup is.

Those who are looking for used luxury brands are the ones who can already afford a new one but are looking to just get a good deal. A small pool of buyers means a bigger drop from the MSRP.

Show More
Back to top button