Understanding Vehicle Depreciation and Why Buying Used Can Be a Better Option

Understanding Vehicle Depreciation and Why Buying Used Can Be a Better Option | Pueblo, CO

Here’s a simple explanation of vehicle depreciation: When you purchase a car, it usually decreases in value over time (unless it’s a very rare collector’s model). That reduction in value is due to the wear and tear on the vehicle that makes it less desirable to future shoppers.

What is depreciation?

Think of value in terms of how much money you spent to buy the car vs. how much money you could make reselling it to someone else. If you spent a lot of money to purchase a new car but can only sell it for — at most — half of what you originally paid for it, the car has depreciated to roughly 50% of its original value. Ouch!

So why does this matter to you? Cars are expensive, and like any asset you don’t want to pay a lot of money on a bad investment. The less your vehicle’s value depreciates from the time you buy it to the time you resell it, the better investment you’ve made.

Why a used car depreciates less

According to Kelley Blue Book, brand-new cars lose about 20% of their total value in the first year of ownership. By the end of the fifth year from its initial sale, that car has lost around 60% of its value. Clearly, most of the depreciation occurs within the earliest years of ownership.

That means a pre-owned car will depreciate less during the ownership period than a brand-new car would. After it’s been bought and sold a time or two, a car has already undergone the bulk of its depreciation. So, if you want the best value on a car, buying a used car from Southwest Motors is a wise investment. Visit our car dealership in Pueblo, Colorado, to find a quality used vehicle for a good value.

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